BILL NUMBER: SB 2094	CHAPTERED  09/30/00

	CHAPTER   1067
	FILED WITH SECRETARY OF STATE   SEPTEMBER 30, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 30, 2000
	PASSED THE SENATE   AUGUST 31, 2000
	PASSED THE ASSEMBLY   AUGUST 29, 2000
	AMENDED IN ASSEMBLY   AUGUST 28, 2000
	AMENDED IN ASSEMBLY   AUGUST 25, 2000
	AMENDED IN ASSEMBLY   JUNE 15, 2000
	AMENDED IN SENATE   MAY 1, 2000

INTRODUCED BY   Committee on Insurance (Senators Speier (Chair),
Escutia, Figueroa, Hughes, Johnson, Johnston, Leslie, Lewis, Schiff,
and Sher)

                        FEBRUARY 25, 2000

   An act to amend Sections 56.05, 56.10, 56.30, and 56.101 of the
Civil Code, to amend Sections 1347.15, 1363.5, 1364.5, 1367.01,
1367.51, 1368, 1368.04, 1370.4, 1375.4, 1386, and 1395.6 of, to amend
and renumber Section 13933 of, and to repeal Section 1367.5 of, the
Health and Safety Code, to amend Sections 10123.135 and 10145.3 of
the Insurance Code, and to amend Section 25002 of the Welfare and
Institutions Code, relating to health care.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 2094, Committee on Insurance.  Health care.
   Existing law provides for the regulation and licensing of health
care service plans by the Department of Managed Care.  Existing law
provides for the regulation and licensing of disability insurers by
the Department of Insurance.
   The Confidentiality of Medical Information Act limits the
disclosure of medical information by a provider of health care, a
health care service plan, or a contractor relative to a patient, as
specified.
   This bill would make technical changes to various provisions of
that act and other health care-related provisions by correcting
erroneous section references and making other related conforming and
clarifying changes.
   This bill would incorporate additional changes to Section 56.10 of
the Civil Code proposed by AB 2414 and SB 1903, to be operative if
this bill and one or more of the other bills are enacted and become
effective on or before January 1, 2001, and this bill is enacted
last.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 56.05 of the Civil Code is amended to read:
   56.05.  For purposes of this part:
   (a) "Authorization" means permission granted in accordance with
Section 56.11 or 56.21 for the disclosure of medical information.
   (b) "Authorized recipient" means any person who is authorized to
receive medical information pursuant to Section 56.10 or 56.20.
   (c) "Contractor" means any person or entity that is a medical
group, independent practice association, pharmaceutical benefits
manager, or a medical service organization and is not a health care
service plan or provider of health care.  "Contractor" shall not
include insurance institutions as defined in subdivision (k) of
Section 791.02 of the Insurance Code or pharmaceutical benefits
managers licensed pursuant to the Knox-Keene Health Care Service Plan
Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division
2 of the Health and Safety Code).
   (d) "Health care service plan" means any entity regulated pursuant
to the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2
(commencing with Section 1340) of Division 2 of the Health and Safety
Code).
   (e) "Licensed health care professional" means any person licensed
or certified pursuant to Division 2 (commencing with Section 500) of
the Business and Professions Code, the Osteopathic Initiative Act or
the Chiropractic Initiative Act, or Division 2.5 (commencing with
Section 1797) of the Health and Safety Code.
   (f) "Medical information" means any individually identifiable
information, in electronic or physical form, in possession of or
derived from a provider of health care, health care service plan, or
contractor regarding a patient's medical history, mental or physical
condition, or treatment.  "Individually identifiable" means that the
medical information includes or contains any element of personal
identifying information sufficient to allow identification of the
individual, such as the patient's name, address, electronic mail
address, telephone number, or social security number, or other
information that, alone or in combination with other publicly
available information, reveals the individual's identity.
   (g) "Patient" means any natural person, whether or not still
living, who received health care services from a provider of health
care and to whom medical information pertains.
   (h) "Provider of health care" means any person licensed or
certified pursuant to Division 2 (commencing with Section 500) of the
Business and Professions Code; any person licensed pursuant to the
Osteopathic Initiative Act or the Chiropractic Initiative Act; any
person certified pursuant to Division 2.5 (commencing with Section
1797) of the Health and Safety Code; any clinic, health dispensary,
or health facility licensed pursuant to Division 2 (commencing with
Section 1200) of the Health and Safety Code.  "Provider of health
care" shall not include insurance institutions as defined in
subdivision (k) of Section 791.02 of the Insurance Code.
  SEC. 2.  Section 56.10 of the Civil Code is amended to read:
   56.10.  (a) No provider of health care, health care service plan,
or contractor shall disclose medical information regarding a patient
of the provider of health care or an enrollee or subscriber of a
health care service plan without first obtaining an authorization,
except as provided in subdivision (b) or (c).
   (b) A provider of health care, a health care service plan, or a
contractor shall disclose medical information if the disclosure is
compelled by any of the following:
   (1) By a court pursuant to an order of that court.
   (2) By a board, commission, or administrative agency for purposes
of adjudication pursuant to its lawful authority.
   (3) By a party to a proceeding before a court or administrative
agency pursuant to a subpoena, subpoena duces tecum, notice to appear
served pursuant to Section 1987 of the Code of Civil Procedure, or
any provision authorizing discovery in a proceeding before a court or
administrative agency.
   (4) By a board, commission, or administrative agency pursuant to
an investigative subpoena issued under Article 2 (commencing with
Section 11180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the
Government Code.
   (5) By an arbitrator or arbitration panel, when arbitration is
lawfully requested by either party, pursuant to a subpoena duces
tecum issued under Section 1282.6 of the Code of Civil Procedure, or
any other provision authorizing discovery in a proceeding before an
arbitrator or arbitration panel.
   (6) By a search warrant lawfully issued to a governmental law
enforcement agency.
   (7) By the patient or the patient's representative pursuant to
Chapter 1 (commencing with Section 123100) of Part 1 of Division 106
of the Health and Safety Code.
   (8) When otherwise specifically required by law.
   (c) A provider of health care, or a health care service plan may
disclose medical information as follows:
   (1) The information may be disclosed to providers of health care,
health care service plans, contractors, or other health care
professionals or facilities for purposes of diagnosis or treatment of
the patient.  This includes, in an emergency situation, the
communication of patient information by radio transmission or other
means between emergency medical personnel at the scene of an
emergency, or in an emergency medical transport vehicle, and
emergency medical personnel at a health facility licensed pursuant to
Chapter 2 (commencing with Section 1200) of Division 2 of the Health
and Safety Code.
   (2) The information may be disclosed to an insurer, employer,
health care service plan, hospital service plan, employee benefit
plan, governmental authority, contractor, or any other person or
entity responsible for paying for health care services rendered to
the patient, to the extent necessary to allow responsibility for
payment to be determined and payment to be made.  If (A) the patient
is, by reason of a comatose or other disabling medical condition,
unable to consent to the disclosure of medical information and (B) no
other arrangements have been made to pay for the health care
services being rendered to the patient, the information may be
disclosed to a governmental authority to the extent necessary to
determine the patient's eligibility for, and to obtain, payment under
a governmental program for health care services provided to the
patient.  The information may also be disclosed to another provider
of health care or health care service plan as necessary to assist the
other provider or health care service plan in obtaining payment for
health care services rendered by that provider of health care or
health care service plan to the patient.
   (3) The information may be disclosed to any person or entity that
provides billing, claims management, medical data processing, or
other administrative services for providers of health care or health
care service plans or for any of the persons or entities specified in
paragraph (2).  However, no information so disclosed shall be
further disclosed by the recipient in any way that would be violative
of this part.
   (4) The information may be disclosed to organized committees and
agents of professional societies or of medical staffs of licensed
hospitals, licensed health care service plans, professional standards
review organizations, independent medical review organizations and
their selected reviewers, utilization and quality control peer review
organizations as established by Congress in Public Law 97-248 in
1982, contractors, or persons or organizations insuring, responsible
for, or defending professional liability that a provider may incur,
if the committees, agents, health care service plans, organizations,
reviewers, contractors, or persons are engaged in reviewing the
competence or qualifications of health care professionals or in
reviewing health care services with respect to medical necessity,
level of care, quality of care, or justification of charges.
   (5) The information in the possession of any provider of health
care or health care service plan may be reviewed by any private or
public body responsible for licensing or accrediting the provider of
health care or health care service plan.  However, no patient
identifying medical information may be removed from the premises
except as expressly permitted or required elsewhere by law, nor shall
that information be further disclosed by the recipient in any way
that would violate this part.
   (6) The information may be disclosed to the county coroner in the
course of an investigation by the coroner's office.
   (7) The information may be disclosed to public agencies, clinical
investigators, including investigators conducting epidemiologic
studies, health care research organizations, and accredited public or
private nonprofit educational or health care institutions for bona
fide research purposes.  However, no information so disclosed shall
be further disclosed by the recipient in any way that would disclose
the identity of any patient or be violative of this part.
   (8) A provider of health care or health care service plan that has
created medical information as a result of employment-related health
care services to an employee conducted at the specific prior written
request and expense of the employer may disclose to the employee's
employer that part of the information that:
   (A) Is relevant in a lawsuit, arbitration, grievance, or other
claim or challenge to which the employer and the employee are parties
and in which the patient has placed in issue his or her medical
history, mental or physical condition, or treatment, provided that
information may only be used or disclosed in connection with that
proceeding.
   (B) Describes functional limitations of the patient that may
entitle the patient to leave from work for medical reasons or limit
the patient's fitness to perform his or her present employment,
provided that no statement of medical cause is included in the
information disclosed.
   (9) Unless the provider of health care or health care service plan
is notified in writing of an agreement by the sponsor, insurer, or
administrator to the contrary, the information may be disclosed to a
sponsor, insurer, or administrator of a group or individual insured
or uninsured plan or policy that the patient seeks coverage by or
benefits from, if the information was created by the provider of
health care or health care service plan as the result of services
conducted at the specific prior written request and expense of the
sponsor, insurer, or administrator for the purpose of evaluating the
application for coverage or benefits.
   (10) The information may be disclosed to a health care service
plan by providers of health care that contract with the health care
service plan and may be transferred among providers of health care
that contract with the health care service plan, for the purpose of
administering the health care service plan.  Medical information may
not otherwise be disclosed by a health care service plan except in
accordance with the provisions of this part.
   (11) Nothing in this part shall prevent the disclosure by a
provider of health care or a health care service plan to an insurance
institution, agent, or support organization, subject to Article 6.6
(commencing with Section 791) of Part 2 of Division 1 of the
Insurance Code, of medical information if the insurance institution,
agent, or support organization has complied with all requirements for
obtaining the information pursuant to Article 6.6 (commencing with
Section 791) of Part 2 of Division 1 of the Insurance Code.
   (12) The information relevant to the patient's condition and care
and treatment provided may be disclosed to a probate court
investigator engaged in determining the need for an initial
conservatorship or continuation of an existent conservatorship, if
the patient is unable to give informed consent, or to a probate court
investigator, probation officer, or domestic relations investigator
engaged in determining the need for an initial guardianship or
continuation of an existent guardianship.
   (13) The information may be disclosed to an organ procurement
organization or a tissue bank processing the tissue of a decedent for
transplantation into the body of another person, but only with
respect to the donating decedent, for the purpose of aiding the
transplant.  For the purpose of this paragraph, the terms "tissue
bank" and "tissue" have the same meaning as defined in Section 1635
of the Health and Safety Code.
   (14) The information may be disclosed when the disclosure is
otherwise specifically authorized by law, such as the voluntary
reporting, either directly or indirectly, to the federal Food and
Drug Administration of adverse events related to drug products or
medical device problems.
   (15) Basic information including the patient's name, city of
residence, age, sex, and general condition may be disclosed to a
state or federally recognized disaster relief organization for the
purpose of responding to disaster welfare inquiries.
   (16) The information may be disclosed to a third party for
purposes of encoding, encrypting, or otherwise anonymizing data.
However, no information so disclosed shall be further disclosed by
the recipient in any way that would be violative of this part,
including the unauthorized manipulation of coded or encrypted medical
information that reveals individually identifiable medical
information.
   (17) For purposes of chronic disease management programs,
information may be disclosed to any entity contracting with a health
care service plan to monitor or administer care of enrollees for a
covered benefit, provided that the disease management services and
care are authorized by a treating physician.
   (d) Except to the extent expressly authorized by the patient or
enrollee or subscriber or as provided by subdivisions (b) and (c), no
provider of health care, health care service plan, or contractor
shall intentionally share, sell, or otherwise use any medical
information for any purpose not necessary to provide health care
services to the patient.
   (e) Except to the extent expressly authorized by the patient or
enrollee or subscriber or as provided by subdivisions (b) and (c), no
contractor shall further disclose medical information regarding a
patient of the provider of health care or an enrollee or subscriber
of a health care service plan or insurer or self-insured employer
received under this section to any person or entity that is not
engaged in providing direct health care services to the patient or
his or her provider of health care or health care service plan or
insurer or self-insured employer.
  SEC. 2.1.  Section 56.10 of the Civil Code is amended to read:
   56.10.  (a) No provider of health care, health care service plan,
or contractor shall disclose medical information regarding a patient
of the provider of health care or an enrollee or subscriber of a
health care service plan without first obtaining an authorization,
except as provided in subdivision (b) or (c).
   (b) A provider of health care, a health care service plan, or a
contractor shall disclose medical information if the disclosure is
compelled by any of the following:
   (1) By a court pursuant to an order of that court.
   (2) By a board, commission, or administrative agency for purposes
of adjudication pursuant to its lawful authority.
   (3) By a party to a proceeding before a court or administrative
agency pursuant to a subpoena, subpoena duces tecum, notice to appear
served pursuant to Section 1987 of the Code of Civil Procedure, or
any provision authorizing discovery in a proceeding before a court or
administrative agency.
   (4) By a board, commission, or administrative agency pursuant to
an investigative subpoena issued under Article 2 (commencing with
Section 11180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the
Government Code.
   (5) By an arbitrator or arbitration panel, when arbitration is
lawfully requested by either party, pursuant to a subpoena duces
tecum issued under Section 1282.6 of the Code of Civil Procedure, or
any other provision authorizing discovery in a proceeding before an
arbitrator or arbitration panel.
   (6) By a search warrant lawfully issued to a governmental law
enforcement agency.
   (7) By the patient or the patient's representative pursuant to
Chapter 1 (commencing with Section 123100) of Part 1 of Division 106
of the Health and Safety Code.
   (8) When otherwise specifically required by law.
   (c) A provider of health care, or a health care service plan may
disclose medical information as follows:
   (1) The information may be disclosed to providers of health care,
health care service plans, contractors, or other health care
professionals or facilities for purposes of diagnosis or treatment of
the patient.  This includes, in an emergency situation, the
communication of patient information by radio transmission or other
means between emergency medical personnel at the scene of an
emergency, or in an emergency medical transport vehicle, and
emergency medical personnel at a health facility licensed pursuant to
Chapter 2 (commencing with Section 1250) of Division 2 of the Health
and Safety Code.
   (2) The information may be disclosed to an insurer, employer,
health care service plan, hospital service plan, employee benefit
plan, governmental authority, contractor, or any other person or
entity responsible for paying for health care services rendered to
the patient, to the extent necessary to allow responsibility for
payment to be determined and payment to be made.  If (A) the patient
is, by reason of a comatose or other disabling medical condition,
unable to consent to the disclosure of medical information and (B) no
other arrangements have been made to pay for the health care
services being rendered to the patient, the information may be
disclosed to a governmental authority to the extent necessary to
determine the patient's eligibility for, and to obtain, payment under
a governmental program for health care services provided to the
patient.  The information may also be disclosed to another provider
of health care or health care service plan as necessary to assist the
other provider or health care service plan in obtaining payment for
health care services rendered by that provider of health care or
health care service plan to the patient.
   (3) The information may be disclosed to any person or entity that
provides billing, claims management, medical data processing, or
other administrative services for providers of health care or health
care service plans or for any of the persons or entities specified in
paragraph (2).  However, no information so disclosed shall be
further disclosed by the recipient in any way that would be violative
of this part.
   (4) The information may be disclosed to organized committees and
agents of professional societies or of medical staffs of licensed
hospitals, licensed health care service plans, professional standards
review organizations, independent medical review organizations and
their selected reviewers, utilization and quality control peer review
organizations as established by Congress in Public Law 97-248 in
1982, contractors, or persons or organizations insuring, responsible
for, or defending professional liability that a provider may incur,
if the committees, agents, health care service plans, organizations,
reviewers, contractors, or persons are engaged in reviewing the
competence or qualifications of health care professionals or in
reviewing health care services with respect to medical necessity,
level of care, quality of care, or justification of charges.
   (5) The information in the possession of any provider of health
care or health care service plan may be reviewed by any private or
public body responsible for licensing or accrediting the provider of
health care or health care service plan.  However, no patient
identifying medical information may be removed from the premises
except as expressly permitted or required elsewhere by law, nor shall
that information be further disclosed by the recipient in any way
that would violate this part.
   (6) The information may be disclosed to the county coroner in the
course of an investigation by the coroner's office.
   (7) The information may be disclosed to public agencies, clinical
investigators, including investigators conducting epidemiologic
studies, health care research organizations, and accredited public or
private nonprofit educational or health care institutions for bona
fide research purposes.  However, no information so disclosed shall
be further disclosed by the recipient in any way that would disclose
the identity of any patient or be violative of this part.
   (8) A provider of health care or health care service plan that has
created medical information as a result of employment-related health
care services to an employee conducted at the specific prior written
request and expense of the employer may disclose to the employee's
employer that part of the information that:
   (A) Is relevant in a lawsuit, arbitration, grievance, or other
claim or challenge to which the employer and the employee are parties
and in which the patient has placed in issue his or her medical
history, mental or physical condition, or treatment, provided that
information may only be used or disclosed in connection with that
proceeding.
   (B) Describes functional limitations of the patient that may
entitle the patient to leave from work for medical reasons or limit
the patient's fitness to perform his or her present employment,
provided that no statement of medical cause is included in the
information disclosed.
   (9) Unless the provider of health care or health care service plan
is notified in writing of an agreement by the sponsor, insurer, or
administrator to the contrary, the information may be disclosed to a
sponsor, insurer, or administrator of a group or individual insured
or uninsured plan or policy that the patient seeks coverage by or
benefits from, if the information was created by the provider of
health care or health care service plan as the result of services
conducted at the specific prior written request and expense of the
sponsor, insurer, or administrator for the purpose of evaluating the
application for coverage or benefits.
   (10) The information may be disclosed to a health care service
plan by providers of health care that contract with the health care
service plan and may be transferred among providers of health care
that contract with the health care service plan, for the purpose of
administering the health care service plan.  Medical information may
not otherwise be disclosed by a health care service plan except in
accordance with the provisions of this part.
   (11) Nothing in this part shall prevent the disclosure by a
provider of health care or a health care service plan to an insurance
institution, agent, or support organization, subject to Article 6.6
(commencing with Section 791) of Part 2 of Division 1 of the
Insurance Code, of medical information if the insurance institution,
agent, or support organization has complied with all requirements for
obtaining the information pursuant to Article 6.6 (commencing with
Section 791) of Part 2 of Division 1 of the Insurance Code.
   (12) The information relevant to the patient's condition and care
and treatment provided may be disclosed to a probate court
investigator engaged in determining the need for an initial
conservatorship or continuation of an existent conservatorship, if
the patient is unable to give informed consent, or to a probate court
investigator, probation officer, or domestic relations investigator
engaged in determining the need for an initial guardianship or
continuation of an existent guardianship.
   (13) The information may be disclosed to an organ procurement
organization or a tissue bank processing the tissue of a decedent for
transplantation into the body of another person, but only with
respect to the donating decedent, for the purpose of aiding the
transplant.  For the purpose of this paragraph, the terms "tissue
bank" and "tissue" have the same meaning as defined in Section 1635
of the Health and Safety Code.
   (14) The information may be disclosed when the disclosure is
otherwise specifically authorized by law, such as the voluntary
reporting, either directly or indirectly, to the federal Food and
Drug Administration of adverse events related to drug products or
medical device problems.
   (15) Basic information including the patient's name, city of
residence, age, sex, and general condition may be disclosed to a
state or federally recognized disaster relief organization for the
purpose of responding to disaster welfare inquiries.
   (16) The information may be disclosed to a third party for
purposes of encoding, encrypting, or otherwise anonymizing data.
However, no information so disclosed shall be further disclosed by
the recipient in any way that would be violative of this part,
including the unauthorized manipulation of coded or encrypted medical
information that reveals individually identifiable medical
information.
   (17) For purposes of disease management programs and services as
defined in Section 1399.901 of the Health and Safety Code,
information may be disclosed as follows:  (A) to any entity
contracting with a health care service plan or the health care
service plan's contractors to monitor or administer care of enrollees
for a covered benefit, provided that the disease management services
and care are authorized by a treating physician, or (B) to any
disease management organization, as defined in Section 1399.900 of
the Health and Safety Code, that complies fully with the physician
authorization requirements of Section 1399.902 of the Health and
Safety Code, provided that the health care service plan or its
contractor provides or has provided a description of the disease
management services to a treating physician or to the health care
service plan's or contractor's network of physicians.  Nothing in
this paragraph shall be construed to require physician authorization
for the care or treatment of the adherents of any well-recognized
church or religious denomination who depend solely upon prayer or
spiritual means for healing in the practice of the religion of that
church or denomination.
   (d) Except to the extent expressly authorized by the patient or
enrollee or subscriber or as provided by subdivisions (b) and (c), no
provider of health care, health care service plan, or contractor
shall intentionally share, sell, or otherwise use any medical
information for any purpose not necessary to provide health care
services to the                                              patient.

   (e) Except to the extent expressly authorized by the patient or
enrollee or subscriber or as provided by subdivisions (b) and (c), no
contractor shall further disclose medical information regarding a
patient of the provider of health care or an enrollee or subscriber
of a health care service plan or insurer or self-insured employer
received under this section to any person or entity that is not
engaged in providing direct health care services to the patient or
his or her provider of health care or health care service plan or
insurer or self-insured employer.
  SEC. 2.2.  Section 56.10 of the Civil Code is amended to read:
   56.10.  (a) No provider of health care, health care service plan,
or contractor shall disclose medical information regarding a patient
of the provider of health care or an enrollee or subscriber of a
health care service plan without first obtaining an authorization,
except as provided in subdivision (b) or (c).
   (b) A provider of health care, a health care service plan, or a
contractor shall disclose medical information if the disclosure is
compelled by any of the following:
   (1) By a court pursuant to an order of that court.
   (2) By a board, commission, or administrative agency for purposes
of adjudication pursuant to its lawful authority.
   (3) By a party to a proceeding before a court or administrative
agency pursuant to a subpoena, subpoena duces tecum, notice to appear
served pursuant to Section 1987 of the Code of Civil Procedure, or
any provision authorizing discovery in a proceeding before a court or
administrative agency.
   (4) By a board, commission, or administrative agency pursuant to
an investigative subpoena issued under Article 2 (commencing with
Section 11180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the
Government Code.
   (5) By an arbitrator or arbitration panel, when arbitration is
lawfully requested by either party, pursuant to a subpoena duces
tecum issued under Section 1282.6 of the Code of Civil Procedure, or
any other provision authorizing discovery in a proceeding before an
arbitrator or arbitration panel.
   (6) By a search warrant lawfully issued to a governmental law
enforcement agency.
   (7) By the patient or the patient's representative pursuant to
Chapter 1 (commencing with Section 123100) of Part 1 of Division 106
of the Health and Safety Code.
   (8) When otherwise specifically required by law.
   (c) A provider of health care, or a health care service plan may
disclose medical information as follows:
   (1) The information may be disclosed to providers of health care,
health care service plans, contractors, or other health care
professionals or facilities for purposes of diagnosis or treatment of
the patient.  This includes, in an emergency situation, the
communication of patient information by radio transmission or other
means between emergency medical personnel at the scene of an
emergency, or in an emergency medical transport vehicle, and
emergency medical personnel at a health facility licensed pursuant to
Chapter 2 (commencing with Section 1200) of Division 2 of the Health
and Safety Code.
   (2) The information may be disclosed to an insurer, employer,
health care service plan, hospital service plan, employee benefit
plan, governmental authority, contractor, or any other person or
entity responsible for paying for health care services rendered to
the patient, to the extent necessary to allow responsibility for
payment to be determined and payment to be made.  If (A) the patient
is, by reason of a comatose or other disabling medical condition,
unable to consent to the disclosure of medical information and (B) no
other arrangements have been made to pay for the health care
services being rendered to the patient, the information may be
disclosed to a governmental authority to the extent necessary to
determine the patient's eligibility for, and to obtain, payment under
a governmental program for health care services provided to the
patient.  The information may also be disclosed to another provider
of health care or health care service plan as necessary to assist the
other provider or health care service plan in obtaining payment for
health care services rendered by that provider of health care or
health care service plan to the patient.
   (3) The information may be disclosed to any person or entity that
provides billing, claims management, medical data processing, or
other administrative services for providers of health care or health
care service plans or for any of the persons or entities specified in
paragraph (2).  However, no information so disclosed shall be
further disclosed by the recipient in any way that would be violative
of this part.
   (4) The information may be disclosed to organized committees and
agents of professional societies or of medical staffs of licensed
hospitals, licensed health care service plans, professional standards
review organizations, independent medical review organizations and
their selected reviewers, utilization and quality control peer review
organizations as established by Congress in Public Law 97-248 in
1982, contractors, or persons or organizations insuring, responsible
for, or defending professional liability that a provider may incur,
if the committees, agents, health care service plans, organizations,
reviewers, contractors, or persons are engaged in reviewing the
competence or qualifications of health care professionals or in
reviewing health care services with respect to medical necessity,
level of care, quality of care, or justification of charges.
   (5) The information in the possession of any provider of health
care or health care service plan may be reviewed by any private or
public body responsible for licensing or accrediting the provider of
health care or health care service plan.  However, no patient
identifying medical information may be removed from the premises
except as expressly permitted or required elsewhere by law, nor shall
that information be further disclosed by the recipient in any way
that would violate this part.
   (6) The information may be disclosed to the county coroner in the
course of an investigation by the coroner's office.
   (7) The information may be disclosed to public agencies, clinical
investigators, including investigators conducting epidemiologic
studies, health care research organizations, and accredited public or
private nonprofit educational or health care institutions for bona
fide research purposes.  However, no information so disclosed shall
be further disclosed by the recipient in any way that would disclose
the identity of any patient or be violative of this part.
   (8) A provider of health care or health care service plan that has
created medical information as a result of employment-related health
care services to an employee conducted at the specific prior written
request and expense of the employer may disclose to the employee's
employer that part of the information that:
   (A) Is relevant in a lawsuit, arbitration, grievance, or other
claim or challenge to which the employer and the employee are parties
and in which the patient has placed in issue his or her medical
history, mental or physical condition, or treatment, provided that
information may only be used or disclosed in connection with that
proceeding.
   (B) Describes functional limitations of the patient that may
entitle the patient to leave from work for medical reasons or limit
the patient's fitness to perform his or her present employment,
provided that no statement of medical cause is included in the
information disclosed.
   (9) Unless the provider of health care or health care service plan
is notified in writing of an agreement by the sponsor, insurer, or
administrator to the contrary, the information may be disclosed to a
sponsor, insurer, or administrator of a group or individual insured
or uninsured plan or policy that the patient seeks coverage by or
benefits from, if the information was created by the provider of
health care or health care service plan as the result of services
conducted at the specific prior written request and expense of the
sponsor, insurer, or administrator for the purpose of evaluating the
application for coverage or benefits.
   (10) The information may be disclosed to a health care service
plan by providers of health care that contract with the health care
service plan and may be transferred among providers of health care
that contract with the health care service plan, for the purpose of
administering the health care service plan.  Medical information may
not otherwise be disclosed by a health care service plan except in
accordance with the provisions of this part.
   (11) Nothing in this part shall prevent the disclosure by a
provider of health care or a health care service plan to an insurance
institution, agent, or support organization, subject to Article 6.6
(commencing with Section 791) of Part 2 of Division 1 of the
Insurance Code, of medical information if the insurance institution,
agent, or support organization has complied with all requirements for
obtaining the information pursuant to Article 6.6 (commencing with
Section 791) of Part 2 of Division 1 of the Insurance Code.
   (12) The information relevant to the patient's condition and care
and treatment provided may be disclosed to a probate court
investigator engaged in determining the need for an initial
conservatorship or continuation of an existent conservatorship, if
the patient is unable to give informed consent, or to a probate court
investigator, probation officer, or domestic relations investigator
engaged in determining the need for an initial guardianship or
continuation of an existent guardianship.
   (13) The information may be disclosed to an organ procurement
organization or a tissue bank processing the tissue of a decedent for
transplantation into the body of another person, but only with
respect to the donating decedent, for the purpose of aiding the
transplant.  For the purpose of this paragraph, the terms "tissue
bank" and "tissue" have the same meaning as defined in Section 1635
of the Health and Safety Code.
   (14) The information may be disclosed when the disclosure is
otherwise specifically authorized by law, such as the voluntary
reporting, either directly or indirectly, to the federal Food and
Drug Administration of adverse events related to drug products or
medical device problems.
   (15) Basic information including the patient's name, city of
residence, age, sex, and general condition may be disclosed to a
state or federally recognized disaster relief organization for the
purpose of responding to disaster welfare inquiries.
   (16) The information may be disclosed to a third party for
purposes of encoding, encrypting, or otherwise anonymizing data.
However, no information so disclosed shall be further disclosed by
the recipient in any way that would be violative of this part,
including the unauthorized manipulation of coded or encrypted medical
information that reveals individually identifiable medical
information.
   (17) For purposes of chronic disease management programs,
information may be disclosed to any entity contracting with a health
care service plan to monitor or administer care of enrollees for a
covered benefit, provided that the disease management services and
care are authorized by a treating physician.
   (d) Except to the extent expressly authorized by the patient or
enrollee or subscriber or as provided by subdivisions (b) and (c), no
provider of health care, health care service plan contractor, or
corporation and its subsidiaries and affiliates shall intentionally
share, sell, or otherwise use any medical information for any purpose
not necessary to provide health care services to the patient.
   (e) Except to the extent expressly authorized by the patient or
enrollee or subscriber or as provided by subdivisions (b) and (c), no
contractor or corporation and its subsidiaries and affiliates shall
further disclose medical information regarding a patient of the
provider of health care or an enrollee or subscriber of a health care
service plan or insurer or self-insured employer received under this
section to any person or entity that is not engaged in providing
direct health care services to the patient or his or her provider of
health care or health care service plan or insurer or self-insured
employer.
  SEC. 2.3.  Section 56.10 of the Civil Code is amended to read:
   56.10.  (a) No provider of health care, health care service plan,
or contractor shall disclose medical information regarding a patient
of the provider of health care or an enrollee or subscriber of a
health care service plan without first obtaining an authorization,
except as provided in subdivision (b) or (c).
   (b) A provider of health care, a health care service plan, or a
contractor shall disclose medical information if the disclosure is
compelled by any of the following:
   (1) By a court pursuant to an order of that court.
   (2) By a board, commission, or administrative agency for purposes
of adjudication pursuant to its lawful authority.
   (3) By a party to a proceeding before a court or administrative
agency pursuant to a subpoena, subpoena duces tecum, notice to appear
served pursuant to Section 1987 of the Code of Civil Procedure, or
any provision authorizing discovery in a proceeding before a court or
administrative agency.
   (4) By a board, commission, or administrative agency pursuant to
an investigative subpoena issued under Article 2 (commencing with
Section 11180) of Chapter 2 of Part 1 of Division 3 of Title 2 of the
Government Code.
   (5) By an arbitrator or arbitration panel, when arbitration is
lawfully requested by either party, pursuant to a subpoena duces
tecum issued under Section 1282.6 of the Code of Civil Procedure, or
any other provision authorizing discovery in a proceeding before an
arbitrator or arbitration panel.
   (6) By a search warrant lawfully issued to a governmental law
enforcement agency.
   (7) By the patient or the patient's representative pursuant to
Chapter 1 (commencing with Section 123100) of Part 1 of Division 106
of the Health and Safety Code.
   (8) When otherwise specifically required by law.
   (c) A provider of health care, or a health care service plan may
disclose medical information as follows:
   (1) The information may be disclosed to providers of health care,
health care service plans, contractor's or other health care
professionals or facilities for purposes of diagnosis or treatment of
the patient.  This includes, in an emergency situation, the
communication of patient information by radio transmission or other
means between emergency medical personnel at the scene of an
emergency, or in an emergency medical transport vehicle, and
emergency medical personnel at a health facility licensed pursuant to
Chapter 2 (commencing with Section 1250) of Division 2 of the Health
and Safety Code.
   (2) The information may be disclosed to an insurer, employer,
health care service plan, hospital service plan, employee benefit
plan, governmental authority, contractor or any other person or
entity responsible for paying for health care services rendered to
the patient, to the extent necessary to allow responsibility for
payment to be determined and payment to be made.  If (A) the patient
is, by reason of a comatose or other disabling medical condition,
unable to consent to the disclosure of medical information and (B) no
other arrangements have been made to pay for the health care
services being rendered to the patient, the information may be
disclosed to a governmental authority to the extent necessary to
determine the patient's eligibility for, and to obtain, payment under
a governmental program for health care services provided to the
patient.  The information may also be disclosed to another provider
of health care or health care service plan as necessary to assist the
other provider or health care service plan in obtaining payment for
health care services rendered by that provider of health care or
health care service plan to the patient.
   (3) The information may be disclosed to any person or entity that
provides billing, claims management, medical data processing, or
other administrative services for providers of health care or health
care service plans or for any of the persons or entities specified in
paragraph (2).  However, no information so disclosed shall be
further disclosed by the recipient in any way that would be violative
of this part.
   (4) The information may be disclosed to organized committees and
agents of professional societies or of medical staffs of licensed
hospitals, licensed health care service plans, professional standards
review organizations, independent medical review organizations and
their selected reviewers utilization and quality control peer review
organizations as established by Congress in Public Law 97-248 in
1982, contractors or persons or organizations insuring, responsible
for, or defending professional liability that a provider may incur,
if the committees, agents, health care service plans, organizations,
reviewers, contractors or persons are engaged in reviewing the
competence or qualifications of health care professionals or in
reviewing health care services with respect to medical necessity,
level of care, quality of care, or justification of charges.
   (5) The information in the possession of any provider of health
care or health care service plan may be reviewed by any private or
public body responsible for licensing or accrediting the provider of
health care or health care service plan.  However, no patient
identifying medical information may be removed from the premises
except as expressly permitted or required elsewhere by law, nor shall
that information be further disclosed by the recipient in any way
that would violate this part.
   (6) The information may be disclosed to the county coroner in the
course of an investigation by the coroner's office.
   (7) The information may be disclosed to public agencies, clinical
investigators, including investigators conducting epidemiologic
studies, health care research organizations, and accredited public or
private nonprofit educational or health care institutions for bona
fide research purposes.  However, no information so disclosed shall
be further disclosed by the recipient in any way that would disclose
the identity of any patient or be violative of this part.
   (8) A provider of health care or health care service plan that has
created medical information as a result of employment-related health
care services to an employee conducted at the specific prior written
request and expense of the employer may disclose to the employee's
employer that part of the information that:
   (A) Is relevant in a lawsuit, arbitration, grievance, or other
claim or challenge to which the employer and the employee are parties
and in which the patient has placed in issue his or her medical
history, mental or physical condition, or treatment, provided that
information may only be used or disclosed in connection with that
proceeding.
   (B) Describes functional limitations of the patient that may
entitle the patient to leave from work for medical reasons or limit
the patient's fitness to perform his or her present employment,
provided that no statement of medical cause is included in the
information disclosed.
   (9) Unless the provider of health care or health care service plan
is notified in writing of an agreement by the sponsor, insurer, or
administrator to the contrary, the information may be disclosed to a
sponsor, insurer, or administrator of a group or individual insured
or uninsured plan or policy that the patient seeks coverage by or
benefits from, if the information was created by the provider of
health care or health care service plan as the result of services
conducted at the specific prior written request and expense of the
sponsor, insurer, or administrator for the purpose of evaluating the
application for coverage or benefits.
   (10) The information may be disclosed to a health care service
plan by providers of health care that contract with the health care
service plan and may be transferred among providers of health care
that contract with the health care service plan, for the purpose of
administering the health care service plan.  Medical information may
not otherwise be disclosed by a health care service plan except in
accordance with the provisions of this part.
   (11) Nothing in this part shall prevent the disclosure by a
provider of health care or a health care service plan to an insurance
institution, agent, or support organization, subject to Article 6.6
(commencing with Section 791) of Part 2 of Division 1 of the
Insurance Code, of medical information if the insurance institution,
agent, or support organization has complied with all requirements for
obtaining the information pursuant to Article 6.6 (commencing with
Section 791) of Part 2 of Division 1 of the Insurance Code.
   (12) The information relevant to the patient's condition and care
and treatment provided may be disclosed to a probate court
investigator engaged in determining the need for an initial
conservatorship or continuation of an existent conservatorship, if
the patient is unable to give informed consent, or to a probate court
investigator, probation officer, or domestic relations investigator
engaged in determining the need for an initial guardianship or
continuation of an existent guardianship.
   (13) The information may be disclosed to an organ procurement
organization or a tissue bank processing the tissue of a decedent for
transplantation into the body of another person, but only with
respect to the donating decedent, for the purpose of aiding the
transplant.  For the purpose of this paragraph, the terms "tissue
bank" and "tissue" have the same meaning as defined in Section 1635
of the Health and Safety Code.
   (14) The information may be disclosed when the disclosure is
otherwise specifically authorized by law, such as the voluntary
reporting, either directly or indirectly, to the federal Food and
Drug Administration of adverse events related to drug products or
medical device problems.
   (15) Basic information including the patient's name, city of
residence, age, sex, and general condition may be disclosed to a
state or federally recognized disaster relief organization for the
purpose of responding to disaster welfare inquiries.
   (16) The information may be disclosed to a third party for
purposes of encoding, encrypting, or otherwise anonymizing data.
However, no information so disclosed shall be further disclosed by
the recipient in any way that would be violative of this part,
including the unauthorized manipulation of coded or encrypted medical
information that reveals individually identifiable medical
information.
   (17) For purposes of disease management programs and services as
defined in Section 1399.901 of the Health and Safety Code,
information may be disclosed as follows:  (A) to any entity
contracting with a health care service plan or the health care
service plan's contractors to monitor or administer care of enrollees
for a covered benefit, provided that the disease management services
and care are authorized by a treating physician, or (B) to any
disease management organization, as defined in Section 1399.900 of
the Health and Safety Code, that complies fully with the physician
authorization requirements of Section 1399.902 of the Health and
Safety Code, provided that the health care service plan or its
contractor provides or has provided a description of the disease
management services to a treating physician or to the health care
service plan's or contractor's network of physicians.  Nothing in
this paragraph shall be construed to require physician authorization
for the care or treatment of the adherents of any well-recognized
church or religious denomination who depend solely upon prayer or
spiritual means for healing in the practice of the religion of that
church or denomination.
   (d) Except to the extent expressly authorized by the patient or
enrollee or subscriber or as provided by subdivisions (b) and (c), no
provider of health care, health care service plan contractor, or
corporation and its subsidiaries and affiliates shall intentionally
share, sell, or otherwise use any medical information for any purpose
not necessary to provide health care services to the patient.
   (e) Except to the extent expressly authorized by the patient or
enrollee or subscriber or as provided by subdivisions (b) and (c), no
contractor or corporation and its subsidiaries and affiliates shall
further disclose medical information regarding a patient of the
provider of health care or an enrollee or subscriber of a health care
service plan or insurer or self-insured employer received under this
section to any person or entity that is not engaged in providing
direct health care services to the patient or his or her provider of
health care or health care service plan or insurer or self-insured
employer.
  SEC. 3.  Section 56.30 of the Civil Code is amended to read:
  56.30.  The disclosure and use of the following medical information
shall not be subject to the limitations of this part:
   (a) (Mental health and developmental disabilities) Information and
records obtained in the course of providing services under Division
4 (commencing with Section 4000), Division 4.1 (commencing with
Section 4400), Division 4.5 (commencing with Section 4500), Division
5 (commencing with Section 5000), Division 6 (commencing with Section
6000), or Division 7 (commencing with Section 7100) of the Welfare
and Institutions Code.
   (b) (Public social services) Information and records that are
subject to Sections 10850, 14124.1, and 14124.2 of the Welfare and
Institutions Code.
   (c) (State health services, communicable diseases, developmental
disabilities) Information and records maintained pursuant to former
Chapter 2 (commencing with Section 200) of Part 1 of Division 1 of
the Health and Safety Code and pursuant to the Communicable Disease
Prevention and Control Act (subdivision (a) of Section 27 of the
Health and Safety Code).
   (d) (Licensing and statistics) Information and records maintained
pursuant to Division 2 (commencing with Section 1200) and Part 1
(commencing with Section 102100) of Division 102 of the Health and
Safety Code; pursuant to Chapter 3 (commencing with Section 1200) of
Division 2 of the Business and Professions Code; and pursuant to
Section 8608, 8817, or 8909 of the Family Code.
   (e) (Medical survey, workers' safety) Information and records
acquired and maintained or disclosed pursuant to Sections 1380 and
1382 of the Health and
Safety Code and pursuant to Division 5 (commencing with Section 6300)
of the Labor Code.
   (f) (Industrial accidents) Information and records acquired,
maintained, or disclosed pursuant to Division 1 (commencing with
Section 50), Division 4 (commencing with Section 3200), Division 4.5
(commencing with Section 6100), and Division 4.7 (commencing with
Section 6200) of the Labor Code.
   (g) (Law enforcement) Information and records maintained by a
health facility which are sought by a law enforcement agency under
Chapter 3.5 (commencing with Section 1543) of Title 12 of Part 2 of
the Penal Code.
   (h) (Investigations of employment accident or illness) Information
and records sought as part of an investigation of an on-the-job
accident or illness pursuant to Division 5 (commencing with Section
6300) of the Labor Code or pursuant to Section 105200 of the Health
and Safety Code.
   (i) (Alcohol or drug abuse) Information and records subject to the
federal alcohol and drug abuse regulations (Part 2 (commencing with
Section 2.1) of subchapter A of Chapter 1 of Title 42 of the Code of
Federal Regulations) or to Section 11977 of the Health and Safety
Code dealing with narcotic and drug abuse.
   (j) (Patient discharge data) Nothing in this part shall be
construed to limit, expand, or otherwise affect the authority of the
California Health Facilities Commission to collect patient discharge
information from health facilities.
   (k) Medical information and records disclosed to, and their use
by, the Insurance Commissioner, the Director of the Department of
Managed Health Care, the Division of Industrial Accidents, the
Workers' Compensation Appeals Board, the Department of Insurance, or
the Department of Managed Health Care.
  SEC. 4.  Section 56.101 of the Civil Code is amended to read:
   56.101.  Every provider of health care, health care service plan,
or contractor who creates, maintains, preserves, stores, abandons,
destroys, or disposes of medical records shall do so in a manner that
preserves the confidentiality of the information contained therein.
Any provider of health care, health care service plan, or contractor
who negligently creates, maintains, preserves, stores, abandons,
destroys, or disposes of medical records shall be subject to the
remedies and penalties provided under subdivisions (b) and (c) of
Section 56.36.
  SEC. 5.  Section 1347.15 of the Health and Safety Code is amended
to read:
   1347.15.  (a) There is hereby established in the Department of
Managed Health Care the Financial Solvency Standards Board composed
of eight members.  The members shall consist of the director, or the
director's designee, and seven members appointed by the director.
The seven members appointed by the director may be, but are not
necessarily limited to, individuals with training and experience in
the following subject areas or fields: medical and health care
economics; accountancy, with experience in integrated or affiliated
health care delivery systems; excess loss insurance underwriting in
the medical, hospital, and health plan business; actuarial studies in
the area of health care delivery systems; management and
administration in integrated or affiliated health care delivery
systems; investment banking; and information technology in integrated
or affiliated health care delivery systems.  The members appointed
by the director shall be appointed for a term of three years, but may
be removed or reappointed by the director before the expiration of
the term.
   (b) The purpose of the board is to do all of the following:
   (1) Advise the director on matters of financial solvency affecting
the delivery of health care services.
   (2) Develop and recommend to the director financial solvency
requirements and standards relating to plan operations,
plan-affiliate operations and transactions, plan-provider contractual
relationships, and provider-affiliate operations and transactions.
   (3) Periodically monitor and report on the implementation and
results of the financial solvency requirements and standards.
   (c) Financial solvency requirements and standards recommended to
the director by the board may, after a period of review and comment
not to exceed 45 days and, notwithstanding Section 1347, be noticed
for adoption as regulations as proposed or modified under the
rulemaking provisions of the Administrative Procedure Act (Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code).  During the director's 45-day review and
comment period, the director, in consultation with the board, may
postpone the adoption of the requirements and standards pending
further review and comment.  Within five business days of receipt by
the director of the recommendation of the board, the director shall
send an information only copy of the recommendations to the members
of the Advisory Committee on Managed Care.  Nothing in this
subdivision prohibits the director from adopting regulations,
including emergency regulations, under the rulemaking provisions of
the Administrative Procedure Act.
   (d) Except as provided in subdivision (e), the board shall meet at
least quarterly and at the call of the chair.  In order to preserve
the independence of the board, the director shall not serve as chair.
  The members of the board may establish their own rules and
procedures.  All members shall serve without compensation, but shall
be reimbursed from department funds for expenses actually and
necessarily incurred in the performance of their duties.
   (e) During the two years from the date of the first meeting of the
board, the board shall meet monthly in order to expeditiously
fulfill its purpose under paragraphs (1) and (2) of subdivision (b).

   (f) For purposes of this section, "board" means the Financial
Solvency Standards Board.
  SEC. 6.  Section 1363.5 of the Health and Safety Code is amended to
read:
   1363.5.  (a) A plan shall disclose or provide for the disclosure
to the director and to network providers the process the plan, its
contracting provider groups, or any entity with which the plan
contracts for services that include utilization review or utilization
management functions, uses to authorize, modify, or deny health care
services under the benefits provided by the plan, including coverage
for subacute care, transitional inpatient care, or care provided in
skilled nursing facilities.  A plan shall also disclose those
processes to enrollees or persons designated by an enrollee, or to
any other person or organization, upon request.  The disclosure to
the director shall include the policies, procedures, and the
description of the process that are filed with the director pursuant
to subdivision (b) of Section 1367.01.
   (b) The criteria or guidelines used by plans, or any entities with
which plans contract for services that include utilization review or
utilization management functions, to determine whether to authorize,
modify, or deny health care services shall:
   (1) Be developed with involvement from actively practicing health
care providers.
   (2) Be consistent with sound clinical principles and processes.
   (3) Be evaluated, and updated if necessary, at least annually.
   (4) If used as the basis of a decision to modify, delay, or deny
services in a specified case under review, be disclosed to the
provider and the enrollee in that specified case.
   (5) Be available to the public upon request.  A plan shall only be
required to disclose the criteria or guidelines for the specific
procedures or conditions requested.  A plan may charge reasonable
fees to cover administrative expenses related to disclosing criteria
or guidelines pursuant to this paragraph, limited to copying and
postage costs.  The plan may also make the criteria or guidelines
available through electronic communication means.
   (c) The disclosure required by paragraph (5) of subdivision (b)
shall be accompanied by the following notice:  "The materials
provided to you are guidelines used by this plan to authorize,
modify, or deny care for persons with similar illnesses or
conditions.  Specific care and treatment may vary depending on
individual need and the benefits covered under your contract."
  SEC. 7.  Section 1364.5 of the Health and Safety Code is amended to
read:
   1364.5.  (a) On or before July 1, 2001, every health care service
plan shall file with the director a copy of their policies and
procedures to protect the security of patient medical information to
ensure compliance with the Confidentiality of Information Act (Part
2.6 (commencing with Section 56) of Division 1 of the Civil Code).
Any amendment to the policies and procedures shall be filed in
accordance with Section 1352.
   (b) On and after July 1, 2001, every health care service plan
shall, upon request, provide to enrollees and subscribers a written
statement that describes how the contracting organization or health
care service plan maintains the confidentiality of medical
information obtained by and in the possession of the contracting
organization or the health care service plan.
   (c) The statement required by subdivision (b) shall be in at least
12-point type and meet the following requirements:
   (1) The statement shall describe how the contracting organization
or health care service plan protects the confidentiality of medical
information pursuant to this article and inform patients or enrollees
and subscribers that any disclosure of medical information beyond
the provisions of the law is prohibited.
   (2) The statement shall describe the types of medical information
that may be collected and the type of sources that may be used to
collect the information, the purposes for which the contracting
organization or plan will obtain medical information from other
health care providers.
   (3) The statement shall describe the circumstances under which
medical information may be disclosed without prior authorization,
pursuant to Section 56.10 of the Civil Code.
   (4) The statement shall describe how patients or enrollees and
subscribers may obtain access to medical information created by and
in the possession of the contracting organization or health care
service plan, including copies of medical information.
   (d) On and after July 1, 2001, every health care service plan
shall include in its evidence of coverage or disclosure form the
following notice, in 12-point type:
A STATEMENT DESCRIBING (NAME OR PLAN OR "OUR") POLICIES AND
PROCEDURES FOR PRESERVING THE CONFIDENTIALITY OF MEDICAL RECORDS IS
AVAILABLE AND WILL BE FURNISHED TO YOU UPON REQUEST.
  SEC. 8.  Section 1367.01 of the Health and Safety Code is amended
to read:
   1367.01.  (a) Every health care service plan and any entity with
which it contracts for services that include utilization review or
utilization management functions, that prospectively,
retrospectively, or concurrently reviews and approves, modifies,
delays, or denies, based in whole or in part on medical necessity,
requests by providers prior to, retrospectively, or concurrent with
the provision of health care services to enrollees, or that delegates
these functions to medical groups or independent practice
associations or to other contracting providers, shall comply with
this section.
   (b) A health care service plan that is subject to this section
shall have written policies and procedures establishing the process
by which the plan prospectively, retrospectively, or concurrently
reviews and approves, modifies, delays, or denies, based in whole or
in part on medical necessity, requests by providers of health care
services for plan enrollees.  These policies and procedures shall
ensure that decisions based on the medical necessity of proposed
health care services are consistent with criteria or guidelines that
are supported by clinical principles and processes.  These criteria
and guidelines shall be developed pursuant to Section 1363.5.  These
policies and procedures, and a description of the process by which
the plan reviews and approves, modifies, delays, or denies requests
by providers prior to, retrospectively, or concurrent with the
provision of health care services to enrollees, shall be filed with
the director for review and approval, and shall be disclosed by the
plan to providers and enrollees upon request, and by the plan to the
public upon request.
   (c) Every health care service plan subject to this section shall
employ or designate a medical director who holds an unrestricted
license to practice medicine in this state issued pursuant to Section
2050 of the Business and Professions Code or pursuant to the
Osteopathic Act, or, if the plan is a specialized health care service
plan, a clinical director with California licensure in a clinical
area appropriate to the type of care provided by the specialized
health care service plan.  The medical director or clinical director
shall ensure that the process by which the plan reviews and approves,
modifies, or denies, based in whole or in part on medical necessity,
requests by providers prior to, retrospectively, or concurrent with
the provision of health care services to enrollees, complies with the
requirements of this section.
   (d) If health plan personnel, or individuals under contract to the
plan to review requests by providers, approve the provider's
request, pursuant to subdivision (b), the decision shall be
communicated to the provider pursuant to subdivision (h).
   (e) No individual, other than a licensed physician or a licensed
health care professional who is competent to evaluate the specific
clinical issues involved in the health care services requested by the
provider, may deny or modify requests for authorization of health
care services for an enrollee for reasons of medical necessity.  The
decision of the physician or other health care professional shall be
communicated to the provider and the enrollee pursuant to subdivision
(h).
   (f) The criteria or guidelines used by the health care service
plan to determine whether to approve, modify, or deny requests by
providers prior to, retrospectively, or concurrent with, the
provision of health care services to enrollees shall be consistent
with clinical principles and processes.  These criteria and
guidelines shall be developed pursuant to the requirements of Section
1363.5.
   (g) If the health care service plan requests medical information
from providers in order to determine whether to approve, modify, or
deny requests for authorization, the plan shall request only the
information reasonably necessary to make the determination.
   (h) In determining whether to approve, modify, or deny requests by
providers prior to, retrospectively, or concurrent with the
provision of health care services to enrollees, based in whole or in
part on medical necessity, every health care service plan subject to
this section shall meet the following requirements:
   (1) Decisions to approve, modify, or deny, based on medical
necessity, requests by providers prior to, or concurrent with the
provision of health care services to enrollees that do not meet the
requirements for the 72-hour review required by paragraph (2), shall
be made in a timely fashion appropriate for the nature of the
enrollee's condition, not to exceed five business days from the plan'
s receipt of the information reasonably necessary and requested by
the plan to make the determination.  In cases where the review is
retrospective, the decision shall be communicated to the individual
who received services, or to the individual's designee, within 30
days of the receipt of information that is reasonably necessary to
make this determination, and shall be communicated to the provider in
a manner that is consistent with current law.  For purposes of this
section, retrospective reviews shall be for care rendered on or after
January 1, 2000.
   (2) When the enrollee's condition is such that the enrollee faces
an imminent and serious threat to his or her health including, but
not limited to, the potential loss of life, limb, or other major
bodily function, or the normal timeframe for the decisionmaking
process, as described in paragraph (1), would be detrimental to the
enrollee's life or health or could jeopardize the enrollee's ability
to regain maximum function, decisions to approve, modify, or deny
requests by providers prior to, or concurrent with, the provision of
health care services to enrollees, shall be made in a timely fashion
appropriate for the nature of the enrollee's condition, not to exceed
72 hours after the plan's receipt of the information reasonably
necessary and requested by the plan to make the determination.
Nothing in this section shall be construed to alter the requirements
of subdivision (b) of Section 1371.4.  Notwithstanding Section
1371.4, the requirements of this division shall be applicable to all
health plans and other entities conducting utilization review or
utilization management.
   (3) Decisions to approve, modify, or deny requests by providers
for authorization prior to, or concurrent with, the provision of
health care services to enrollees shall be communicated to the
requesting provider within 24 hours of the decision.  Except for
concurrent review decisions pertaining to care that is underway,
which shall be communicated to the enrollee's treating provider
within 24 hours, decisions resulting in denial, delay, or
modification of all or part of the requested health care service
shall be communicated to the enrollee in writing within two business
days of the decision.  In the case of concurrent review, care shall
not be discontinued until the enrollee's treating provider has been
notified of the plan's decision, and a care plan has been agreed upon
by the treating provider that is appropriate for the medical needs
of that patient.
   (4) Communications regarding decisions to approve requests by
providers prior to, retrospectively, or concurrent with the provision
of health care services to enrollees shall specify the specific
health care service approved.  Responses regarding decisions to deny,
delay, or modify health care services requested by providers prior
to, retrospectively, or concurrent with the provision of health care
services to enrollees shall be communicated to the enrollee in
writing, and to providers initially by telephone or facsimile, except
with regard to decisions rendered retrospectively, and then in
writing, and shall include a clear and concise explanation of the
reasons for the plan's decision, a description of the criteria or
guidelines used, and the clinical reasons for the decisions regarding
medical necessity.  Any written communication to a physician or
other health care provider of a denial, delay, or modification of a
request shall include the name and telephone number of the health
care professional responsible for the denial, delay, or modification.
  The telephone number provided shall be a direct number or an
extension, to allow the physician or health care provider easily to
contact the professional responsible for the denial, delay, or
modification.  Responses shall also include information as to how the
enrollee may file a grievance with the plan pursuant to Section
1368, and in the case of Medi-Cal enrollees, shall explain how to
request an administrative hearing and aid paid pending under Sections
51014.1 and 51014.2 of Title 22 of the California Code of
Regulations.
   (5) If the health care service plan cannot make a decision to
approve, modify, or deny the request for authorization within the
timeframes specified in paragraph (1) or (2) because the plan is not
in receipt of all of the information reasonably necessary and
requested, or because the plan requires consultation by an expert
reviewer, or because the plan has asked that an additional
examination or test be performed upon the enrollee, provided the
examination or test is reasonable and consistent with good medical
practice, the plan shall, immediately upon the expiration of the
timeframe specified in paragraph (1) or (2) or as soon as the plan
becomes aware that it will not meet the timeframe, whichever occurs
first, notify the provider and the enrollee, in writing, that the
plan cannot make a decision to approve, modify, or deny the request
for authorization within the required timeframe, and specify the
information requested but not received, or the expert reviewer to be
consulted, or the additional examinations or tests required.  The
plan shall also notify the provider and enrollee of the anticipated
date on which a decision may be rendered.  Upon receipt of all
information reasonably necessary and requested by the plan, the plan
shall approve, modify, or deny the request for authorization within
the timeframes specified in paragraph (1) or (2), whichever applies.

   (6) If the director determines that a health care service plan has
failed to meet any of the timeframes in this section, or has failed
to meet any other requirement of this section, the director may
assess, by order, administrative penalties for each failure.  A
proceeding for the issuance of an order assessing administrative
penalties shall be subject to appropriate notice to, and an
opportunity for a hearing with regard to, the person affected, in
accordance with subdivision (a) of Section 1397.  The administrative
penalties shall not be deemed an exclusive remedy for the director.
These penalties shall be paid to the State Managed Care Fund.
   (i) Every health care service plan subject to this section shall
maintain telephone access for providers to request authorization for
health care services.
   (j) Every health care service plan subject to this section that
reviews requests by providers prior to, retrospectively, or
concurrent with, the provision of health care services to enrollees
shall establish, as part of the quality assurance program required by
Section 1370, a process by which the plan's compliance with this
section is assessed and evaluated.  The process shall include
provisions for evaluation of complaints, assessment of trends,
implementation of actions to correct identified problems, mechanisms
to communicate actions and results to the appropriate health plan
employees and contracting providers, and provisions for evaluation of
any corrective action plan and measurements of performance.
   (k) The director shall review a health care service plan's
compliance with this section as part of its periodic onsite medical
survey of each plan undertaken pursuant to Section 1380, and shall
include a discussion of compliance with this section as part of its
report issued pursuant to that section.
   (l) This section shall not apply to decisions made for the care or
treatment of the sick who depend upon prayer or spiritual means for
healing in the practice of religion as set forth in subdivision (a)
of Section 1270.
   (m) Nothing in this section shall cause a health care service plan
to be defined as a health care provider for purposes of any
provision of law, including, but not limited to, Section 6146 of the
Business and Professions Code, Sections 3333.1 and 3333.2 of the
Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the
Code of Civil Procedure.
  SEC. 9.  Section 1367.5 of the Health and Safety Code is repealed.

  SEC. 10.  Section 1367.51 of the Health and Safety Code is amended
to read:
   1367.51.  (a) Every health care service plan contract, except a
specialized health care service plan contract, that is issued,
amended, delivered, or renewed on or after January 1, 2000, and that
covers hospital, medical, or surgical expenses shall include coverage
for the following equipment and supplies for the management and
treatment of insulin-using diabetes, non-insulin-using diabetes, and
gestational diabetes as medically necessary, even if the items are
available without a prescription:
   (1) Blood glucose monitors and blood glucose testing strips.
   (2) Blood glucose monitors designed to assist the visually
impaired.
   (3) Insulin pumps and all related necessary supplies.
   (4) Ketone urine testing strips.
   (5) Lancets and lancet puncture devices.
   (6) Pen delivery systems for the administration of insulin.
   (7) Podiatric devices to prevent or treat diabetes-related
complications.
   (8) Insulin syringes.
   (9) Visual aids, excluding eyewear, to assist the visually
impaired with proper dosing of insulin.
   (b) Every health care service plan contract, except a specialized
health care service plan contract, that is issued, amended,
delivered, or renewed on or after January 1, 2000, that covers
prescription benefits shall include coverage for the following
prescription items if the items are determined to be medically
necessary:
   (1) Insulin.
   (2) Prescriptive medications for the treatment of diabetes.
   (3) Glucagon.
   (c) The copayments and deductibles for the benefits specified in
subdivisions (a) and (b) shall not exceed those established for
similar benefits within the given plan.
   (d) Every plan shall provide coverage for diabetes outpatient
self-management training, education, and medical nutrition therapy
necessary to enable an enrollee to properly use the equipment,
supplies, and medications set forth in subdivisions (a) and (b), and
additional diabetes outpatient self-management training, education,
and medical nutrition therapy upon the direction or prescription of
those services by the enrollee's participating physician.  If a plan
delegates outpatient self-management training to contracting
providers, the plan shall require contracting providers to ensure
that diabetes outpatient self-management training, education, and
medical nutrition therapy are provided by appropriately licensed or
registered health care professionals.
   (e) The diabetes outpatient self-management training, education,
and medical nutrition therapy services identified in subdivision (d)
shall be provided by appropriately licensed or registered health care
professionals as prescribed by a participating health care
professional legally authorized to prescribe the service.  These
benefits shall include, but not be limited to, instruction that will
enable diabetic patients and their families to gain an understanding
of the diabetic disease process, and the daily management of diabetic
therapy, in order to thereby avoid frequent hospitalizations and
complications.
   (f) The copayments for the benefits specified in subdivision (d)
shall not exceed those established for physician office visits by the
plan.
   (g) Every health care service plan governed by this section shall
disclose the benefits covered pursuant to this section in the plan's
evidence of coverage and disclosure forms.
            (h) A health care service plan may not reduce or
eliminate coverage as a result of the requirements of this section.

  SEC. 11.  Section 1368 of the Health and Safety Code is amended to
read:
   1368.  (a) Every plan shall do all of the following:
   (1) Establish and maintain a grievance system approved by the
department under which enrollees may submit their grievances to the
plan.  Each system shall provide reasonable procedures in accordance
with department regulations that shall ensure adequate consideration
of enrollee grievances and rectification when appropriate.
   (2) Inform its subscribers and enrollees upon enrollment in the
plan and annually thereafter of the procedure for processing and
resolving grievances.  The information shall include the location and
telephone number where grievances may be submitted.
   (3) Provide forms for grievances to be given to subscribers and
enrollees who wish to register written grievances.  The forms used by
plans licensed pursuant to Section 1353 shall be approved by the
director in advance as to format.
   (4) Provide subscribers and enrollees with written responses to
grievances, with a clear and concise explanation of the reasons for
the plan's response.  For grievances involving the delay, denial, or
modification of health care services, the plan response shall
describe the criteria used and the clinical reasons for its decision,
including all criteria and clinical reasons related to medical
necessity.  If a plan, or one of its contracting providers, issues a
decision delaying, denying, or modifying health care services based
in whole or in part on a finding that the proposed health care
services are not a covered benefit under the contract that applies to
the enrollee, the decision shall clearly specify the provisions in
the contract that exclude that coverage.
   (5) Keep in its files all copies of grievances, and the responses
thereto, for a period of five years.
   (b) (1) (A) After either completing the grievance process
described in subdivision (a), or participating in the process for at
least 30 days, a subscriber or enrollee may submit the grievance to
the department for review.  In any case determined by the department
to be a case involving an imminent and serious threat to the health
of the patient, including, but not limited to, severe pain, the
potential loss of life, limb, or major bodily function, or in any
other case where the department determines that an earlier review is
warranted, a subscriber or enrollee shall not be required to complete
the grievance process or participate in the process for at least 30
days before submitting a grievance to the department for review.
   (B) A grievance may be submitted to the department for review and
resolution prior to any arbitration.
   (C) Notwithstanding subparagraphs (A) and (B), the department may
refer any grievance that does not pertain to compliance with this
chapter to the State Department of Health Services, the California
Department of Aging, the federal Health Care Financing
Administration, or any other appropriate governmental entity for
investigation and resolution.
   (2) If the subscriber or enrollee is a minor, or is incompetent or
incapacitated, the parent, guardian, conservator, relative, or other
designee of the subscriber or enrollee, as appropriate, may submit
the grievance to the department as the agent of the subscriber or
enrollee.  Further, a provider may join with, or otherwise assist, a
subscriber or enrollee, or the agent, to submit the grievance to the
department. In addition, following submission of the grievance to the
department, the subscriber or enrollee, or the agent, may authorize
the provider to assist, including advocating on behalf of the
subscriber or enrollee.  For purposes of this section, a "relative"
includes the parent, stepparent, spouse, adult son or daughter,
grandparent, brother, sister, uncle, or aunt of the subscriber or
enrollee.
   (3) The department shall review the written documents submitted
with the subscriber's or the enrollee's request for review, or
submitted by the agent on behalf of the subscriber or enrollee.  The
department may ask for additional information, and may hold an
informal meeting with the involved parties, including providers who
have joined in submitting the grievance or who are otherwise
assisting or advocating on behalf of the subscriber or enrollee. If
after reviewing the record, the department concludes that the
grievance, in whole or in part, is eligible for review under the
independent medical review system established pursuant to Article
5.55 (commencing with Section 1374.30), the department shall
immediately notify the subscriber or enrollee, or agent, of that
option and shall, if requested orally or in writing, assist the
subscriber or enrollee in participating in the independent medical
review system.
   (4) If after reviewing the record of a grievance, the department
concludes that a health care service eligible for coverage and
payment under a health care service plan contract has been delayed,
denied, or modified by a plan, or by one of its contracting
providers, in whole or in part due to a determination that the
service is not medically necessary, and that determination was not
communicated to the enrollee in writing along with a notice of the
enrollee's potential right to participate in the independent medical
review system, as required by this chapter, the director shall, by
order, assess administrative penalties.  A proceeding for the
issuance of an order assessing administrative penalties shall be
subject to appropriate notice of, and the opportunity for, a hearing
with regard to the person affected in accordance with Section 1397.
The administrative penalties shall not be deemed an exclusive remedy
available to the director.  These penalties shall be paid to the
State Managed Care Fund.
   (5) The department shall send a written notice of the final
disposition of the grievance, and the reasons therefor, to the
subscriber or enrollee, the agent, to any provider that has joined
with or is otherwise assisting the subscriber or enrollee, and to the
plan, within 30 calendar days of receipt of the request for review
unless the director, in his or her discretion, determines that
additional time is reasonably necessary to fully and fairly evaluate
the relevant grievance. In any case not eligible for the independent
medical review system established pursuant to Article 5.55
(commencing with Section 1374.30), the department's written notice
shall include, at a minimum, the following:
   (A) A summary of its findings and the reasons why the department
found the plan to be, or not to be, in compliance with any applicable
laws, regulations, or orders of the director.
   (B) A discussion of the department's contact with any medical
provider, or any other independent expert relied on by the
department, along with a summary of the views and qualifications of
that provider or expert.
   (C) If the enrollee's grievance is sustained in whole or part,
information about any corrective action taken.
   (6) In any department review of a grievance involving a disputed
health care service, as defined in subdivision (b) of Section
1374.30, that is not eligible for the independent medical review
system established pursuant to Article 5.55 (commencing with Section
1374.30), in which the department finds that the plan has delayed,
denied, or modified health care services that are medically
necessary, based on the specific medical circumstances of the
enrollee, and those services are a covered benefit under the terms
and conditions of the health care service plan contract, the
department's written notice shall either: (A) order the plan to
promptly offer and provide those health care services to the
enrollee, or (B) order the plan to promptly reimburse the enrollee
for any reasonable costs associated with urgent care or emergency
services, or other extraordinary and compelling health care services,
when the department finds that the enrollee's decision to secure
those services outside of the plan network was reasonable under the
circumstances. The department's order shall be binding on the plan.
   (7) Distribution of the written notice shall not be deemed a
waiver of any exemption or privilege under existing law, including,
but not limited to, Section 6254.5 of the Government Code, for any
information in connection with and including the written notice, nor
shall any person employed or in any way retained by the department be
required to testify as to that information or notice.
   (8) The director shall establish and maintain a system of aging of
grievances that are pending and unresolved for 30 days or more, that
shall include a brief explanation of the reasons each grievance is
pending and unresolved for 30 days or more.
   (9) A subscriber or enrollee, or the agent acting on behalf of a
subscriber or enrollee, may also request voluntary mediation with the
plan prior to exercising the right to submit a grievance to the
department. The use of mediation services shall not preclude the
right to submit a grievance to the department upon completion of
mediation.  In order to initiate mediation, the subscriber or
enrollee, or the agent acting on behalf of the subscriber or
enrollee, and the plan shall voluntarily agree to mediation.
Expenses for mediation shall be borne equally by both sides.  The
department shall have no administrative or enforcement
responsibilities in connection with the voluntary mediation process
authorized by this paragraph.
   (c) The plan's grievance system shall include a system of aging of
grievances that are pending and unresolved for 30 days or more.  The
plan shall provide a quarterly report to the director of grievances
pending and unresolved for 30 or more days with separate categories
of grievances for Medicare enrollees and Medi-Cal enrollees.  The
plan shall include with the report a brief explanation of the reasons
each grievance is pending and unresolved for 30 days or more.  The
plan may include the following statement in the quarterly report that
is made available to the public by the director:
"Under Medicare and Medi-Cal law, Medicare enrollees and Medi-Cal
enrollees each have separate avenues of appeal that are not available
to other enrollees.  Therefore, grievances pending and unresolved
may reflect enrollees pursuing their Medicare or Medi-Cal appeal
rights."
If requested by a plan, the director shall include this statement in
a written report made available to the public and prepared by the
director that describes or compares grievances that are pending and
unresolved with the plan for 30 days or more.  Additionally, the
director shall, if requested by a plan, append to that written report
a brief explanation, provided in writing by the plan, of the reasons
why grievances described in that written report are pending and
unresolved for 30 days or more. The director shall not be required to
include a statement or append a brief explanation to a written
report that the director is required to prepare under this chapter,
including Sections 1380 and 1397.5.
   (d) Subject to subparagraph (C) of paragraph (1) of subdivision
(b), the grievance or resolution procedures authorized by this
section shall be in addition to any other procedures that may be
available to any person, and failure to pursue, exhaust, or engage in
the procedures described in this section shall not preclude the use
of any other remedy provided by law.
   (e) Nothing in this section shall be construed to allow the
submission to the department of any provider grievance under this
section.  However, as part of a provider's duty to advocate for
medically appropriate health care for his or her patients pursuant to
Sections 510 and 2056 of the Business and Professions Code, nothing
in this subdivision shall be construed to prohibit a provider from
contacting and informing the department about any concerns he or she
has regarding compliance with or enforcement of this chapter.
  SEC. 12.  Section 1368.04 of the Health and Safety Code is amended
to read:
   1368.04.  (a) The director shall investigate and take enforcement
action against plans regarding grievances reviewed and found by the
department to involve noncompliance with the requirements of this
chapter, including grievances that have been reviewed pursuant to the
independent medical review system established pursuant to Article
5.55 (commencing with Section 1374.30).  Where substantial harm to an
enrollee has occurred as a result of plan noncompliance, the
director shall, by order, assess administrative penalties subject to
appropriate notice of, and the opportunity for, a hearing with regard
to the person affected in accordance with Section 1397.  The
administrative penalties shall not be deemed an exclusive remedy
available to the director. These penalties shall be paid to the State
Managed Care Fund.  The director shall periodically evaluate
grievances to determine if any audit, investigative, or enforcement
actions should be undertaken by the department.
   (b) The director may, after appropriate notice and opportunity for
hearing in accordance with Section 1397, by order, assess
administrative penalties if the director determines that a health
care service plan has knowingly committed, or has performed with a
frequency that indicates a general business practice, either of the
following:
   (1) Repeated failure to act promptly and reasonably to investigate
and resolve grievances in accordance with Section 1368.01.
   (2) Repeated failure to act promptly and reasonably to resolve
grievances when the obligation of the plan to the enrollee or
subscriber is reasonably clear.
   (c) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed warranted by the director to enforce
this chapter.
   (d) The administrative penalties authorized pursuant to this
section shall be paid to the State Managed Care Fund.
  SEC. 13.  Section 1370.4 of the Health and Safety Code is amended
to read:
   1370.4.  (a) Every health care service plan shall provide an
external, independent review process to examine the plan's coverage
decisions regarding experimental or investigational therapies for
individual enrollees who meet all of the following criteria:
   (1) (A) The enrollee has a life-threatening or seriously
debilitating condition.
   (B) For purposes of this section, "life-threatening" means either
or both of the following:
   (i) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (ii) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (C) For purposes of this section, "seriously debilitating" means
diseases or conditions that cause major irreversible morbidity.
   (2) The enrollee's physician certifies that the enrollee has a
condition, as defined in paragraph (1), for which standard therapies
have not been effective in improving the condition of the enrollee,
for which standard therapies would not be medically appropriate for
the enrollee, or for which there is no more beneficial standard
therapy covered by the plan than the therapy proposed pursuant to
paragraph (3).
   (3) Either (A) the enrollee's physician, who is under contract
with or employed by the plan, has recommended a drug, device,
procedure or other therapy that the physician certifies in writing is
likely to be more beneficial to the enrollee than any available
standard therapies, or (B) the enrollee, or the enrollee's physician
who is a licensed, board-certified or board-eligible physician
qualified to practice in the area of practice appropriate to treat
the enrollee's condition, has requested a therapy that, based on two
documents from the medical and scientific evidence, as defined in
subdivision (d), is likely to be more beneficial for the enrollee
than any available standard therapy.  The physician certification
pursuant to this subdivision shall include a statement of the
evidence relied upon by the physician in certifying his or her
recommendation.  Nothing in this subdivision shall be construed to
require the plan to pay for the services of a nonparticipating
physician provided pursuant to this subdivision, that are not
otherwise covered pursuant to the plan contact.
   (4) The enrollee has been denied coverage by the plan for a drug,
device, procedure, or other therapy recommended or requested pursuant
to paragraph (3).
   (5) The specific drug, device, procedure, or other therapy
recommended pursuant to paragraph (3) would be a covered service,
except for the plan's determination that the therapy is experimental
or investigational.
   (b) The plan's decision to delay, deny, or modify experimental or
investigational therapies shall be subject to the independent medical
review process under Article 5.55 (commencing with Section 1374.30)
except that, in lieu of the information specified in subdivision (b)
of Section 1374.33, an independent medical reviewer shall base his or
her determination on relevant medical and scientific evidence,
including, but not limited to, the medical and scientific evidence
defined in subdivision (d).
   (c) The independent medical review process shall also meet the
following criteria:
   (1) The plan shall notify eligible enrollees in writing of the
opportunity to request the external independent review within five
business days of the decision to deny coverage.
   (2) If the enrollee's physician determines that the proposed
therapy would be significantly less effective if not promptly
initiated, the analyses and recommendations of the experts on the
panel shall be rendered within seven days of the request for
expedited review.  At the request of the expert, the deadline shall
be extended by up to three days for a delay in providing the
documents required.  The timeframes specified in this paragraph shall
be in addition to any otherwise applicable timeframes contained in
subdivision (c) of Section 1374.33.
   (3) Each expert's analysis and recommendation shall be in written
form and state the reasons the requested therapy is or is not likely
to be more beneficial for the enrollee than any available standard
therapy, and the reasons that the expert recommends that the therapy
should or should not be provided by the plan, citing the enrollee's
specific medical condition, the relevant documents provided, and the
relevant medical and scientific evidence, including, but not limited
to, the medical and scientific evidence as defined in subdivision
(d), to support the expert's recommendation.
   (4) Coverage for the services required under this section shall be
provided subject to the terms and conditions generally applicable to
other benefits under the plan contract.
   (d) For the purposes of subdivision (b), "medical and scientific
evidence" means the following sources:
   (1) Peer-reviewed scientific studies published in or accepted for
publication by medical journals that meet nationally recognized
requirements for scientific manuscripts and that submit most of their
published articles for review by experts who are not part of the
editorial staff.
   (2) Peer-reviewed literature, biomedical compendia, and other
medical literature that meet the criteria of the National Institutes
of Health's National Library of Medicine for indexing in Index
Medicus, Excerpta Medicus (EMBASE), Medline, and MEDLARS data base
Health Services Technology Assessment Research (HSTAR).
   (3) Medical journals recognized by the Secretary of Health and
Human Services, under Section 1861(t)(2) of the Social Security Act.

   (4) The following standard reference compendia:  The American
Hospital Formulary Service-Drug Information, the American Medical
Association Drug Evaluation, the American Dental Association Accepted
Dental Therapeutics, and the United States Pharmacopoeia-Drug
Information.
   (5) Findings, studies, or research conducted by or under the
auspices of federal government agencies and nationally recognized
federal research institutes, including the Federal Agency for Health
Care Policy and Research, National Institutes of Health, National
Cancer Institute, National Academy of Sciences, Health Care Financing
Administration, Congressional Office of Technology Assessment, and
any national board recognized by the National Institutes of Health
for the purpose of evaluating the medical value of health services.
   (6) Peer-reviewed abstracts accepted for presentation at major
medical association meetings.
   (e) The independent review process established by this section
shall be required on and after January 1, 2001.
  SEC. 14.  Section 1375.4 of the Health and Safety Code is amended
to read:
   1375.4.  (a) Every contract between a health care service plan and
a risk-bearing organization that is issued, amended, renewed, or
delivered in this state on or after July 1, 2000, shall include
provisions concerning the following, as to the risk-bearing
organization's administrative and financial capacity, which shall be
effective as of January 1, 2001:
   (1) A requirement that the risk-bearing organization furnish
financial information to the health care service plan or the plan's
designated agent and meet any other financial requirements that
assist the health care service plan in maintaining the financial
viability of its arrangements for the provision of health care
services in a manner that does not adversely affect the integrity of
the contract negotiation process.
   (2) A requirement that the health care service plan disclose
information to the risk-bearing organization that enables the
risk-bearing organization to be informed regarding the financial risk
assumed under the contract.
   (3) A requirement that the health care service plans provide
payments of all risk arrangements, excluding capitation, within 180
days after close of the fiscal year.
   (b) In accordance with subdivision (a) of Section 1344, the
director shall adopt regulations on or before June 30, 2000, to
implement this section which shall, at a minimum, provide for the
following:
   (1) (A) A process for reviewing or grading risk-bearing
organizations based on the following criteria:
   (i) The risk-bearing organization meets criterion 1 if it
reimburses, contests, or denies claims for health care services it
has provided, arranged, or for which it is otherwise financially
responsible in accordance with the timeframes and other requirements
described in Section 1371 and in accordance with any other applicable
state and federal laws and regulations.
   (ii) The risk-bearing organization meets criterion 2 if it
estimates its liability for incurred but not reported claims pursuant
to a method that has not been held objectionable by the director,
records the estimate at least quarterly as an accrual in its books
and records, and appropriately reflects this accrual in its financial
statements.
   (iii) The risk-bearing organization meets criterion 3 if it
maintains at all times a positive tangible net equity, as defined in
subdivision (e) of Section 1300.76 of Title 10 of the California Code
of Regulations.
   (iv) The risk-bearing organization meets criterion 4 if it
maintains at all times a positive level of working capital (excess of
current assets over current liabilities).
   (B) A risk-bearing organization may reduce its liabilities for
purposes of calculating tangible net equity, pursuant to clause (iii)
of subparagraph (A), and working capital, pursuant to clause (iv) of
subparagraph (A), by the amount of any liabilities the payment of
which is guaranteed by a sponsoring organization pursuant to a
qualified guarantee.  A sponsoring organization is one that has a
tangible net equity of a level to be established by the director that
is in excess of all amounts that it has guaranteed to any person or
entity.  A qualified guarantee is one that meets all of the
following:
   (i) It is approved by a board resolution of the sponsoring
organization.
   (ii) The sponsoring organization agrees to submit audited annual
financial statements to the plan within 120 days of the end of the
sponsoring organization's fiscal year.
   (iii) The guarantee is unconditional except for a maximum monetary
limit.
   (iv) The guarantee is not limited in duration with respect to
liabilities arising during the term of the guarantee.
   (v) The guarantee provides for six months' advance notice to the
plan prior to its cancellation.
   (2) The information required from risk-bearing organizations to
assist in reviewing or grading these risk-bearing organizations,
including balance sheets, claims reports, and designated annual,
quarterly, or monthly financial statements prepared in accordance
with generally accepted accounting principles, to be used in a
manner, and to the extent necessary, provided to a single external
party as approved by the director to the extent that it does not
adversely affect the integrity of the contract negotiation process
between the health care service plan and the risk-bearing
organizations.
   (3) Audits to be conducted in accordance with generally accepted
auditing standards and in a manner that avoids duplication of review
of the risk-bearing organization.
   (4) A process for corrective action plans, as mutually agreed upon
by the health care service plan and the risk-bearing organization
and as approved by the director, for cases where the review or
grading indicates deficiencies that need to be corrected by the
risk-bearing organization, and contingency plans to ensure the
delivery of health care services if the corrective action fails.  The
corrective action plan shall be approved by the director and
standardized, to the extent possible, to meet the needs of the
director and all health care service plans contracting with the
risk-bearing organization.  If the health care service plan and the
risk-bearing organization are unable to determine a mutually
agreeable corrective action plan, the director shall determine the
corrective action plan.
   (5) The disclosure of information by health care service plans to
the risk-bearing organization that enables the risk-bearing
organization to be informed regarding the risk assumed under the
contract, including:
   (A) Enrollee information monthly.
   (B) Risk arrangement information, information pertaining to any
pharmacy risk assumed under the contract, information regarding
incentive payments, and information on income and expenses assigned
to the risk-bearing organization quarterly.

(6) Periodic reports from each health care service plan to the
director that include information concerning the risk-bearing
organizations and the type and amount of financial risk assumed by
them, and, if deemed necessary and appropriate by the director, a
registration process for the risk-bearing organizations.
   (7) The confidentiality of financial and other records to be
produced, disclosed, or otherwise made available, unless as otherwise
determined by the director.
   (c) The failure by a health care service plan to comply with the
contractual requirements pursuant to this section shall constitute
grounds for disciplinary action.  The director shall, as appropriate,
within 60 days after receipt of documented violation from a
risk-bearing organization, investigate and take enforcement action
against a health care service plan that fails to comply with these
requirements and shall periodically evaluate contracts between health
care service plans and risk-bearing organizations to determine if
any audit, evaluation, or enforcement actions should be undertaken by
the department.
   (d) The Financial Solvency Standards Board established in Section
1347.15 shall study and report to the director on or before January
1, 2001, regarding all of the following:
   (1) The feasibility of requiring that there be in force insurance
coverage commensurate with the financial risk assumed by the
risk-bearing organization to protect against financial losses.
   (2) The appropriateness of different risk-bearing arrangements
between health care service plans and risk-bearing organizations.
   (3) The appropriateness of the four criteria specified in
paragraph (1) of subdivision (b).
   (e) This section shall not apply to specialized health care
service plans.
   (f) For purposes of this section, "provider organization" means a
medical group, independent practice association, or other entity that
delivers, furnishes, or otherwise arranges for or provides health
care services, but does not include an individual or a plan.
   (g) (1) For the purposes of this section, a "risk-bearing
organization" means a professional medical corporation, other form of
corporation controlled by physicians and surgeons, a medical
partnership, a medical foundation exempt from licensure pursuant to
subdivision (l) of Section 1206, or another lawfully organized group
of physicians that delivers, furnishes, or otherwise arranges for or
provides health care services, but does not include an individual or
a health care service plan, and that does all of the following:
   (A) Contracts directly with a health care service plan or arranges
for health care services for the health care service plan's
enrollees.
   (B) Receives compensation for those services on any capitated or
fixed periodic payment basis.
   (C) Is responsible for the processing and payment of claims made
by providers for services rendered by those providers on behalf of a
health care service plan that are covered under the capitation or
fixed periodic payment made by the plan to the risk-bearing
organization.  Nothing in this subparagraph in any way limits,
alters, or abrogates any responsibility of a health care service plan
under existing law.
   (2) Notwithstanding paragraph (1), risk-bearing organizations
shall not be deemed to include a provider organization that meets
either of the following requirements:
   (A) The health care service plan files with the department
consolidated financial statements that include the provider
organization.
   (B) The health care service plan is the only health care service
plan with which the provider organization contracts for arranging or
providing health care services and, during the previous and current
fiscal years, the provider organization's maximum potential expenses
for providing or arranging for health care services did not exceed
115 percent of its maximum potential revenue for providing or
arranging for those services.
   (h) For purposes of this section, "claims" include, but are not
limited to, contractual obligations to pay capitation or payments on
a managed hospital payment basis.
  SEC. 15.  Section 1386 of the Health and Safety Code is amended to
read:
   1386.  (a) The director may, after appropriate notice and
opportunity for a hearing, by order suspend or revoke any license
issued under this chapter to a health care service plan or assess
administrative penalties if the director determines that the licensee
has committed any of the acts or omissions constituting grounds for
disciplinary action.
   (b) The following acts or omissions constitute grounds for
disciplinary action by the director:
   (1) The plan is operating at variance with the basic
organizational documents as filed pursuant to Section 1351 or 1352,
or with its published plan, or in any manner contrary to that
described in, and reasonably inferred from, the plan as contained in
its application for licensure and annual report, or any modification
thereof, unless amendments allowing the variation have been submitted
to, and approved by, the director.
   (2) The plan has issued, or permits others to use, evidence of
coverage or uses a schedule of charges for health care services which
do not comply with those published in the latest evidence of
coverage found unobjectionable by the director.
   (3) The plan does not provide basic health care services to its
enrollees and subscribers as set forth in the evidence of coverage.
This subdivision shall not apply to specialized health care service
plan contracts.
   (4) The plan is no longer able to meet the standards set forth in
Article 5 (commencing with Section 1367).
   (5) The continued operation of the plan will constitute a
substantial risk to its subscribers and enrollees.
   (6) The plan has violated or attempted to violate, or conspired to
violate, directly or indirectly, or assisted in or abetted a
violation or conspiracy to violate any provision of this chapter, any
rule or regulation adopted by the director pursuant to this chapter,
or any order issued by the director pursuant to this chapter.
   (7) The plan has engaged in any conduct that constitutes fraud or
dishonest dealing or unfair competition, as defined by Section 17200
of the Business and Professions Code.
   (8) The plan has permitted, or aided or abetted any violation by
an employee or contractor who is a holder of any certificate,
license, permit, registration or exemption issued pursuant to the
Business and Professions Code, or this code which would constitute
grounds for discipline against the certificate, license, permit,
registration, or exemption.
   (9) The plan has aided or abetted or permitted the commission of
any illegal act.
   (10) The engagement of a person as an officer, director, employee,
associate, or provider of the plan contrary to the provisions of an
order issued by the director pursuant to subdivision (c) of this
section or subdivision (d) of Section 1388.
   (11) The engagement of a person as a solicitor or supervisor of
solicitation contrary to the provisions of an order issued by the
director pursuant to Section 1388.
   (12) The plan, its management company, or any other affiliate of
the plan, or any controlling person, officer, director, or other
person occupying a principal management or supervisory position in
the plan, management company or affiliate, has been convicted of or
pleaded nolo contendere to a crime, or committed any act involving
dishonesty, fraud, or deceit, which crime or act is substantially
related to the qualifications, functions, or duties of a person
engaged in business in accordance with this chapter.  The director
may revoke or deny a license hereunder irrespective of a subsequent
order under the provisions of Section 1203.4 of the Penal Code.
   (13) The plan violates Section 510, 2056, or 2056.1 of the
Business and Professions Code.
   (14) The plan has been subject to a final disciplinary action
taken by this state, another state, an agency of the federal
government, or another country, for any act or omission that would
constitute a violation of this chapter.
   (15) The plan violates the Confidentiality of Medical Information
Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil
Code).
   (c) (1) The director may prohibit any person from serving as an
officer, director, employee, associate, or provider of any plan or
solicitor firm, or of any management company of any plan, or as a
solicitor, if either of the following applies:
   (A) The prohibition is in the public interest and the person has
committed, caused, participated in, or had knowledge of a violation
of this chapter by a plan, management company, or solicitor firm.
   (B) The person was an officer, director, employee, associate, or
provider of a plan or of a management company or solicitor firm of
any plan whose license has been suspended or revoked pursuant to this
section and the person had knowledge of, or participated in, any of
the prohibited acts for which the license was suspended or revoked.
   (2) A proceeding for the issuance of an order under this
subdivision may be included with a proceeding against a plan under
this section or may constitute a separate proceeding, subject in
either case to subdivision (d).
   (d) A proceeding under this section shall be subject to
appropriate notice to, and the opportunity for a hearing with regard
to, the person affected in accordance with subdivision (a) of Section
1397.
  SEC. 16.  Section 1395.6 of the Health and Safety Code is amended
to read:
   1395.6.  (a) In order to prevent the improper selling, leasing, or
transferring of a health care provider's contract, it is the intent
of the Legislature that every arrangement that results in any payor
paying a health care provider a reduced rate for health care services
based on the health care provider's participation in a network or
panel shall be disclosed to the provider in advance and shall
actively encourage patients to use the network, unless the health
care provider agrees to provide discounts without that active
encouragement.
   (b) Beginning July 1, 2000, every contracting agent that sells,
leases, assigns, transfers, or conveys its list of contracted health
care providers and their contracted reimbursement rates to a payor or
another contracting agent shall, upon entering or renewing a
provider contract, do all of the following:
   (1) Disclose to the provider whether the list of contracted
providers may be sold, leased, transferred, or conveyed to other
payors or other contracting agents, and specify whether those payors
or contracting agents include workers' compensation insurers or
automobile insurers.
   (2) Disclose what specific practices, if any, payors utilize to
actively encourage a payor's subscribers to use the list of
contracted providers when obtaining medical care that entitles a
payor to claim a contracted rate.  For purposes of this paragraph, a
payor is deemed to have actively encouraged its subscribers to use
the list of contracted providers if one of the following occurs:
   (A) The payor offers its subscribers direct financial incentives
to use the list of contracted providers when obtaining medical care.
"Financial incentives" means reduced copayments, reduced
deductibles, premium discounts directly attributable to the use of a
provider panel, or financial penalties directly attributable to the
nonuse of a provider panel.
   (B) The payor provides information to subscribers advising them of
the existence of the list of contracted providers through the use of
a variety of advertising or marketing approaches that supply the
names, addresses, and telephone numbers of contracted providers to
subscribers in advance of their selection of a health care provider,
which approaches may include, but are not limited to, the use of
provider directories, or the use of toll-free telephone numbers or
Internet web site addresses supplied directly to every subscriber.
However, Internet web site addresses alone shall not be deemed to
satisfy the requirements of this subparagraph.  Nothing in this
subparagraph shall prevent contracting agents or payors from
providing only listings of providers located within a reasonable
geographic range of a subscriber.
   (3) Disclose whether payors to which the list of contracted
providers may be sold, leased, transferred, or conveyed may be
permitted to pay a provider's contracted rate without actively
encouraging the payors' subscribers to use the list of contracted
providers when obtaining medical care.
   (4) Disclose, upon the initial signing of a contract, and within
30 calendar days of receipt of a written request from a provider or
provider panel, a payor summary of all payors currently eligible to
claim a provider's contracted rate due to the provider's and payor's
respective written agreement with any contracting agent.
   Nothing in this subdivision shall be construed to require a payor
to actively encourage the payor's subscribers to use the list of
contracted providers when obtaining medical care in the case of an
emergency.
   (c) A contracting agent shall allow providers, upon the initial
signing, renewal, or amendment of a provider contract, to decline to
be included in any list of contracted providers that is sold, leased,
transferred, or conveyed to payors that do not actively encourage
the payors' subscribers to use the list of contracted providers when
obtaining medical care as described in paragraph (2) of subdivision
(b).  Each provider's election under this subdivision shall be
binding on every contracting agent or payor that buys, leases, or
otherwise obtains a list of contracted providers.
   (d) A provider shall not be excluded from any list of contracted
providers that is sold, leased, transferred, or conveyed to payors
that actively encourage the payors' subscribers to use the list of
contracted providers when obtaining medical care, based upon the
provider's refusal to be included on any list of contracted providers
that is sold, leased, transferred, or conveyed to payors that do not
actively encourage the payors' subscribers to use the list of
contracted providers when obtaining medical care.
   (e) A payor shall provide an explanation of benefits or
explanation of review that identifies the name of the network that
has a written agreement signed by the provider whereby the payor is
entitled, directly or indirectly, to pay a preferred rate for the
services rendered.
   (f) A payor shall demonstrate that it is entitled to pay a
contracted rate within 30 business days of receipt of a written
request from a provider who has received a claim payment from the
payor.  The failure of a payor to do so shall render the payor liable
for the amount that the payor would have been required to pay
pursuant to the applicable health care service plan contract covering
the enrollee, which amount shall be due and payable within 10 days
of receipt of written notice from the provider, and shall bar the
payor from taking any future discounts from that provider without the
provider's express written consent until the payor can demonstrate
to the provider that it is entitled to pay a contracted rate as
provided in this subdivision.  A payor shall be deemed to have
demonstrated that it is entitled to pay a contracted rate if it
complies with either of the following:
   (1) Discloses the name of the network that has a written agreement
with the provider whereby the provider agrees to accept discounted
rates, and describes the specific practices the payor utilizes to
comply with paragraph (2) of subdivision (b).
   (2) Identifies the provider's written agreement with a contracting
agent whereby the provider agrees to be included on lists of
contracted providers sold, leased, transferred, or conveyed to payors
that do not actively encourage beneficiaries to use the list of
contracted providers pursuant to subdivision (c).
   (g) For the purposes of this section, the following terms have the
following meanings:
   (1) "Contracting agent" means a health care service plan or a
specialized health care service plan, while engaged, for monetary or
other consideration, in the act of selling, leasing, transferring,
assigning, conveying, or arranging the availability of a provider or
provider panel to provide health care services to subscribers.
   (2) "Payor" means a health care service plan or a specialized
health care service plan.
   (3) "Payor summary" means a written summary that includes the
payor's name and the type of plan, including, but not limited to, a
group health plan, an automobile insurance plan, and a workers'
compensation insurance plan.
   (4) "Provider" means any of the following:
   (A) Any person licensed or certified pursuant to Division 2
(commencing with Section 500) of the Business and Professions Code.
   (B) Any person licensed pursuant to the Chiropractic Initiative
Act or the Osteopathic Initiative Act.
   (C) Any person licensed pursuant to Chapter 2.5 (commencing with
Section 1440) of Division 2.
   (D) A clinic, health dispensary, or health facility licensed
pursuant to Division 2 (commencing with Section 1200).
   (E) Any entity exempt from licensure pursuant to Section 1206.
   (h) This section shall become operative on July 1, 2000.
  SEC. 17.  Section 13933 of the Health and Safety Code is amended
and renumbered to read:
  1374.34.  (a) Upon receiving the decision adopted by the director
pursuant to Section 1374.33 that a disputed health care service is
medically necessary, the plan shall promptly implement the decision.
In the case of reimbursement for services already rendered, the plan
shall reimburse the provider or enrollee, whichever applies, within
five working days.  In the case of services not yet rendered, the
plan shall authorize the services within five working days of receipt
of the written decision from the director, or sooner if appropriate
for the nature of the enrollee's medical condition, and shall inform
the enrollee and provider of the authorization in accordance with the
requirements of paragraph (3) of subdivision (h) of Section 1367.01.

   (b) A plan shall not engage in any conduct that has the effect of
prolonging the independent review process.  The engaging in that
conduct or the failure of the plan to promptly implement the decision
is a violation of this chapter and, in addition to any other fines,
penalties, and other remedies available to the director under this
chapter, the plan shall be subject to an administrative penalty of
not less than five thousand dollars ($5,000) for each day that the
decision is not implemented.  Administrative penalties shall be
deposited in the State Managed Care Fund.
   (c) In any case where an enrollee secured urgent care or emergency
services outside of the plan provider network, which services are
later found by the independent medical review organization to have
been medically necessary pursuant to Section 1374.33, the director
shall require the plan to promptly reimburse the enrollee for any
reasonable costs associated with those services when the director
finds that the enrollee's decision to secure the services outside of
the plan provider network prior to completing the plan grievance
process or seeking an independent medical review was reasonable under
the circumstances and the disputed health care services were a
covered benefit under the terms and conditions of the health care
service plan contract.
   (d) In addition to requiring plan compliance regarding
subdivisions (a), (b), and (c) the director shall review individual
cases submitted for independent medical review to determine whether
any enforcement actions, including penalties, may be appropriate.  In
particular, where substantial harm, as defined in Section 3428 of
the Civil Code, to an enrollee has already occurred because of the
decision of a plan, or one of its contracting providers, to delay,
deny, or modify covered health care services that an independent
medical review determines to be medically necessary pursuant to
Section 1374.33, the director shall impose penalties.
   (e) Pursuant to Section 1368.04, the director shall perform an
annual audit of independent medical review cases for the dual
purposes of education and the opportunity to determine if any
investigative or enforcement actions should be undertaken by the
department, particularly if a plan repeatedly fails to act promptly
and reasonably to resolve grievances associated with a delay, denial,
or modification of medically necessary health care services when the
obligation of the plan to provide those health care services to
enrollees or subscribers is reasonably clear.
  SEC. 18.  Section 10123.135 of the Insurance Code, as amended by
Chapter 539 of the Statutes of 1999, is amended to read:
   10123.135.  (a) Every disability insurer, or an entity with which
it contracts for services that include utilization review or
utilization management functions, that covers hospital, medical, or
surgical expenses and that prospectively, retrospectively, or
concurrently reviews and approves, modifies, delays, or denies, based
in whole or in part on medical necessity, requests by providers
prior to, retrospectively, or concurrent with the provision of health
care services to insureds, or that delegates these functions to
medical groups or independent practice associations or to other
contracting providers, shall comply with this section.
   (b) A disability insurer that is subject to this section, or any
entity with which an insurer contracts for services that include
utilization review or utilization management functions, shall have
written policies and procedures establishing the process by which the
insurer prospectively, retrospectively, or concurrently reviews and
approves, modifies, delays, or denies, based in whole or in part on
medical necessity, requests by providers of health care services for
insureds.  These policies and procedures shall ensure that decisions
based on the medical necessity of proposed health care services are
consistent with criteria or guidelines that are supported by clinical
principles and processes.  These criteria and guidelines shall be
developed pursuant to subdivision (f).  These policies and
procedures, and a description of the process by which an insurer, or
an entity with which an insurer contracts for services that include
utilization review or utilization management functions, reviews and
approves, modifies, delays, or denies requests by providers prior to,
retrospectively, or concurrent with the provision of health care
services to insureds, shall be filed with the commissioner, and shall
be disclosed by the insurer to insureds and providers upon request,
and by the insurer to the public upon request.
   (c) If the number of insureds covered under health benefit plans
in this state that are issued by an insurer subject to this section
constitute at least 50 percent of the number of insureds covered
under health benefit plans issued nationwide by that insurer, the
insurer shall employ or designate a medical director who holds an
unrestricted license to practice medicine in this state issued
pursuant to Section 2050 of the Business and Professions Code or the
Osteopathic Act, or the insurer may employ a clinical director
licensed in California whose scope of practice under California law
includes the right to independently perform all those services
covered by the insurer.  The medical director or clinical director
shall ensure that the process by which the insurer reviews and
approves, modifies, delays, or denies, based in whole or in part on
medical necessity, requests by providers prior to, retrospectively,
or concurrent with the provision of health care services to insureds,
complies with the requirements of this section.  Nothing in this
subdivision shall be construed as restricting the existing authority
of the Medical Board of California.
   (d) If an insurer subject to this section, or individuals under
contract to the insurer to review requests by providers, approve the
provider's request pursuant to subdivision (b), the decision shall be
communicated to the provider pursuant to subdivision (h).
   (e) No individual, other than a licensed physician or a licensed
health care professional who is competent to evaluate the specific
clinical issues involved in the health care services requested by the
provider, may deny or modify requests for authorization of health
care services for an insured for reasons of medical necessity.  The
decision of the physician or other health care provider shall be
communicated to the provider and the insured pursuant to subdivision
(h).
   (f) (1) An insurer shall disclose, or provide for the disclosure,
to the commissioner and to network providers, the process the
insurer, its contracting provider groups, or any entity with which it
contracts for services that include utilization review or
utilization management functions, uses to authorize, delay, modify,
or deny health care services under the benefits provided by the
insurance contract, including coverage for subacute care,
transitional inpatient care, or care provided in skilled nursing
facilities.  An insurer shall also disclose those processes to
policyholders or persons designated by a policyholder, or to any
other person or organization, upon request.
   (2) The criteria or guidelines used by an insurer, or an entity
with which an insurer contracts for utilization review or utilization
management functions, to determine whether to authorize, modify,
delays, or deny health care services, shall:
   (A) Be developed with involvement from actively practicing health
care providers.
   (B) Be consistent with sound clinical principles and processes.
   (C) Be evaluated, and updated if necessary, at least annually.
   (D) If used as the basis of a decision to modify, delay, or deny
services in a specified case under review, be disclosed to the
provider and the policyholder in that specified case.
   (E) Be available to the public upon request.  An insurer shall
only be required to disclose the criteria or guidelines for the
specific procedures or conditions requested.  An insurer may charge
reasonable fees to cover administrative expenses related to
disclosing criteria or guidelines pursuant to this paragraph, limited
to copying and postage costs.  The insurer may also make the
criteria or guidelines available through electronic communication
means.
   (3) The disclosure require by subparagraph (E) of paragraph (2)
shall be accompanied by the following notice:  "The materials
provided to you are guidelines used by this insurer to authorize,
modify, or deny health care benefits for persons with similar
illnesses                                           or conditions.
Specific care and treatment may vary depending on individual need and
the benefits covered under your insurance contract.
   (g) If an insurer subject to this section requests medical
information from providers in order to determine whether to approve,
modify, or deny requests for authorization, the insurer shall request
only the information reasonably necessary to make the determination.

   (h) In determining whether to approve, modify, or deny requests by
providers prior to, retrospectively, or concurrent with the
provision of health care services to insureds, based in whole or in
part on medical necessity, every insurer subject to this section
shall meet the following requirements:
   (1) Decisions to approve, modify, or deny, based on medical
necessity, requests by providers prior to, or concurrent with, the
provision of health care services to insureds that do not meet the
requirements for the 72-hour review required by paragraph (2), shall
be made in a timely fashion appropriate for the nature of the insured'
s condition, not to exceed five business days from the insurer's
receipt of the information reasonably necessary and requested by the
insurer to make the determination.  In cases where the review is
retrospective, the decision shall be communicated to the individual
who received services, or to the individual's designee, within 30
days of the receipt of information that is reasonably necessary to
make this determination, and shall be communicated to the provider in
a manner that is consistent with current law.  For purposes of this
section, retrospective reviews shall be for care rendered on or after
January 1, 2000.
   (2) When the insured's condition is such that the insured faces an
imminent and serious threat to his or her health, including, but not
limited to, the potential loss of life, limb, or other major bodily
function, or the normal timeframe for the decisionmaking process, as
described in paragraph (1), would be detrimental to the insured's
life or health or could jeopardize the insured's ability to regain
maximum function, decisions to approve, modify, or deny requests by
providers prior to, or concurrent with, the provision of health care
services to insureds shall be made in a timely fashion, appropriate
for the nature of the insured's condition, but not to exceed 72 hours
after the insurer's receipt of the information reasonably necessary
and requested by the insurer to make the determination.
   (3) Decisions to approve, modify, or deny requests by providers
for authorization prior to, or concurrent with, the provision of
health care services to insureds shall be communicated to the
requesting provider within 24 hours of the decision.  Except for
concurrent review decisions pertaining to care that is underway,
which shall be communicated to the insured's treating provider within
24 hours, decisions resulting in denial, delay, or modification of
all or part of the requested health care service shall be
communicated to the insured in writing within two business days of
the decision.  In the case of concurrent review, care shall not be
discontinued until the insured's treating provider has been notified
of the insurer's decision and a care plan has been agreed upon by the
treating provider that is appropriate for the medical needs of that
patient.
   (4) Communications regarding decisions to approve requests by
providers prior to, retrospectively, or concurrent with the provision
of health care services to insureds shall specify the specific
health care service approved.  Responses regarding decisions to deny,
delay, or modify health care services requested by providers prior
to, retrospectively, or concurrent with the provision of health care
services to insureds shall be communicated to insureds in writing,
and to providers initially by telephone or facsimile, except with
regard to decisions rendered retrospectively, and then in writing,
and shall include a clear and concise explanation of the reasons for
the insurer's decision, a description of the criteria or guidelines
used, and the clinical reasons for the decisions regarding medical
necessity.  Any written communication to a physician or other health
care provider of a denial, delay, or modification or a request shall
include the name and telephone number of the health care professional
responsible for the denial, delay, or modification.  The telephone
number provided shall be a direct number or an extension, to allow
the physician or health care provider easily to contact the
professional responsible for the denial, delay, or modification.
Responses shall also include information as to how the provider or
the insured may file an appeal with the insurer or seek department
review under the unfair practices provisions of Article 6.5
(commencing with Section 790) of Chapter 1 of Part 7 of Division 1
and the regulations adopted thereunder.
   (5) If the insurer cannot make a decision to approve, modify, or
deny the request for authorization within the timeframes specified in
paragraph (1) or (2) because the insurer is not in receipt of all of
the information reasonably necessary and requested, or because the
insurer requires consultation by an expert reviewer, or because the
insurer has asked that an additional examination or test be performed
upon the insured, provided that the examination or test is
reasonable and consistent with good medical practice, the insurer
shall, immediately upon the expiration of the timeframe specified in
paragraph (1) or (2), or as soon as the insurer becomes aware that it
will not meet the timeframe, whichever occurs first, notify the
provider and the insured, in writing, that the insurer cannot make a
decision to approve, modify, or deny the request for authorization
within the required timeframe, and specify the information requested
but not received, or the expert reviewer to be consulted, or the
additional examinations or tests required.  The insurer shall also
notify the provider and enrollee of the anticipated date on which a
decision may be rendered.  Upon receipt of all information reasonably
necessary and requested by the insurer, the insurer shall approve,
modify, or deny the request for authorization within the timeframes
specified in paragraph (1) or (2), whichever applies.
   (6) If the commissioner determines that an insurer has failed to
meet any of the timeframes in this section, or has failed to meet any
other requirement of this section, the commissioner may assess, by
order, administrative penalties for each failure.  A proceeding for
the issuance of an order assessing administrative penalties shall be
subject to appropriate notice to, and an opportunity for a hearing
with regard to, the person affected.  The administrative penalties
shall not be deemed an exclusive remedy for the commissioner.  These
penalties shall be paid to the Insurance Fund.
   (i) Every insurer subject to this section shall maintain telephone
access for providers to request authorization for health care
services.
   (j) Nothing in this section shall cause a disability insurer to be
defined as a health care provider for purposes of any provision of
law, including, but not limited to, Section 6146 of the Business and
Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and
Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil
Procedure.
  SEC. 19.  Section 10145.3 of the Insurance Code is amended to read:

   10145.3.  (a) Every disability insurer that covers hospital,
medical, or surgical benefits shall provide an external, independent
review process to examine the insurer's coverage decisions regarding
experimental or investigational therapies for individual insureds who
meet all of the following criteria:
   (1) (A) The insured has a life-threatening or seriously
debilitating condition.
   (B) For purposes of this section, "life-threatening" means either
or both of the following:
   (i) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (ii) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (C) For purposes of this section, "seriously debilitating" means
diseases or conditions that cause major irreversible morbidity.
   (2) The insured's physician certifies that the insured has a
condition, as defined in paragraph (1), for which standard therapies
have not been effective in improving the condition of the insured,
for which standard therapies would not be medically appropriate for
the insured, or for which there is no more beneficial standard
therapy covered by the insurer than the therapy proposed pursuant to
paragraph (3).
   (3) Either (A) the insured's contracting physician has recommended
a drug, device, procedure, or other therapy that the physician
certifies in writing is likely to be more beneficial to the insured
than any available standard therapies, or (B) the insured, or the
insured's physician who is a licensed, board-certified or
board-eligible physician qualified to practice in the area of
practice appropriate to treat the insured's condition, has requested
a therapy that, based on two documents from the medical and
scientific evidence, as defined in subdivision (d), is likely to be
more beneficial for the insured than any available standard therapy.
The physician certification pursuant to this subdivision shall
include a statement of the evidence relied upon by the physician in
certifying his or her recommendation.  Nothing in this subdivision
shall be construed to require the insurer to pay for the services of
a noncontracting physician, provided pursuant to this subdivision,
that are not otherwise covered pursuant to the contract.
   (4) The insured has been denied coverage by the insurer for a
drug, device, procedure, or other therapy recommended or requested
pursuant to paragraph (3), unless coverage for the specific therapy
has been excluded by the insurer's contract.
   (5) The specific drug, device, procedure, or other therapy
recommended pursuant to paragraph (3) would be a covered service
except for the insurer's determination that the therapy is
experimental or under investigation.
   (b) The insurer's decision to deny, delay, or modify experimental
or investigational therapies shall be subject to the independent
medical review process established under Article 3.5 (commencing with
Section 10169) of Chapter 1 of Part 2 of Division 2, except that in
lieu of the information specified in subdivision (b) of Section
10169.3, an independent medical reviewer shall base his or her
determination on relevant medical and scientific evidence, including,
but not limited to, the medical and scientific evidence defined in
subdivision (d).
   (c) The independent medical review process shall also meet the
following criteria:
   (1) The insurer shall notify eligible insureds in writing of the
opportunity to request the external independent review within five
business days of the decision to deny coverage.
   (2) If the insured's physician determines that the proposed
therapy would be significantly less effective if not promptly
initiated, the analyses and recommendations of the experts on the
panel shall be rendered within seven days of the request for
expedited review.  At the request of the expert, the deadline shall
be extended by up to three days for a delay in providing the
documents required.  The timeframes specified in this paragraph shall
be in addition to any otherwise applicable timeframes contained in
subdivision (c) of Section 10169.3.
   (3) Each expert's analysis and recommendation shall be in written
form and state the reasons the requested therapy is or is not likely
to be more beneficial for the insured than any available standard
therapy, and the reasons that the expert recommends that the therapy
should or should not be covered by the insurer, citing the insured's
specific medical condition, the relevant documents, and the relevant
medical and scientific evidence, including, but not limited to, the
medical and scientific evidence as defined in subdivision (d), to
support the expert's recommendation.
   (4) Coverage for the services required under this section shall be
provided subject to the terms and conditions generally applicable to
other benefits under the contract.
   (d) For the purposes of subdivision (b), "medical and scientific
evidence" means the following sources:
   (1) Peer-reviewed scientific studies published in or accepted for
publication by medical journals that meet nationally recognized
requirements for scientific manuscripts and that submit most of their
published articles for review by experts who are not part of the
editorial staff.
   (2) Peer-reviewed literature, biomedical compendia and other
medical literature that meet the criteria of the National Institutes
of Health's National Library of Medicine for indexing in Index
Medicus, Excerpta Medicus (EMBASE), Medline and MEDLARS data base
Health Services Technology Assessment Research (HSTAR).
   (3) Medical journals recognized by the Secretary of Health and
Human Services, under Section 1861(t)(2) of the Social Security Act.

   (4) The following standard reference compendia: The American
Hospital Formulary Service-Drug Information, the American Medical
Association Drug Evaluation, the American Dental Association Accepted
Dental Therapeutics and The United States Pharmacopoeia-Drug
Information.
   (5) Findings, studies, or research conducted by or under the
auspices of federal government agencies and nationally recognized
federal research institutes, including the Federal Agency for Health
Care Policy and Research, National Institutes of Health, National
Cancer Institute, National Academy of Sciences, Health Care Financing
Administration, Congressional Office of Technology Assessment, and
any national board recognized by the National Institutes of Health
for the purpose of evaluating the medical value of health services.
   (6) Peer-reviewed abstracts accepted for presentation at major
medical association meetings.
   (e) The independent review process established by this section
shall be required on and after January 1, 2001.
  SEC. 20.  Section 25002 of the Welfare and Institutions Code is
amended to read:
   25002.  To develop the options for achieving universal health care
coverage described in Section 25001, the secretary shall establish a
process by which these options are developed.  The process shall at
a minimum include the following:
   (a) The examination and utilization of research results from the
study performed by the University of California with regard to
methods of financing, delivering and defining universal health care
coverage, done pursuant to the criteria in Senate Concurrent
Resolution 100 of the 1997-1998 Regular Session of the Legislature.
   (b) The examination and utilization of other data and information,
as requested by the secretary or provided to the secretary, with
regard to methods of financing, delivering, or defining universal
health care coverage.
   (c) Developing a process by which representatives of health care
consumers, providers, insurers, health care workers, advocates,
counties, and all other interested parties are engaged in discussion
and debate of the issues faced by the state in providing universal
health coverage.  The secretary shall develop the methods by which
this discussion occurs, provided that it is broadly inclusive of all
groups with an interest in universal health care coverage.
   (d) Interagency participation including, but not limited to, the
State Department of Health Services, the State Department of Mental
Health, the Department of Finance, the Managed Risk Medical Insurance
Board, the Department of Consumer Affairs, the Public Employees'
Retirement System, the State Department of Social Services, the
Department of Managed Health Care, the Department of Insurance, and
any other appropriate agencies which the secretary determines can
contribute to the effort to provide universal health care coverage.
   (e) Obtaining information from the United States Health Care
Financing Administration regarding federal waivers or other forms of
federal participation, if necessary.
  SEC. 21.  (a) Section 2.1 of this bill incorporates amendments to
Section 56.10 of the Civil Code proposed by both this bill and AB
2414.  It shall only become operative if (1) both bills are enacted
and become effective on or before January 1, 2001, (2) each bill
amends Section 56.10 of the Civil Code, and (3) SB 1903 is not
enacted or as enacted does not amend that section, and (4) this bill
is enacted after AB 2414, in which case Sections 2, 2.2, and 2.3 of
this bill shall not become operative.
   (b) Section 2.2 of this bill incorporates amendments to Section
56.10 of the Civil Code proposed by both this bill and SB 1903.  It
shall only become operative if (1) both bills are enacted and become
effective on or before January 1, 2001, (2) each bill amends Section
56.10 of the Civil Code, (3) AB 2414 is not enacted or as enacted
does not amend that section, and (4) this bill is enacted after SB
1903 in which case Sections 2, 2.1, and 2.3 of this bill shall not
become operative.
   (c) Section 2.3 of this bill incorporates amendments to Section
56.10 of the Civil Code proposed by this bill, AB 2414, and SB 1903.
It shall only become operative if (1) all three bills are enacted
and become effective on or before January 1, 2001, (2) all three
bills amend Section 56.10 of the Civil Code, and (3) this bill is
enacted after AB 2414 and SB 1903, in which case Sections 2, 2.1, and
2.2 of this bill shall not become operative.
